Experts have proposed stronger credit assessments, legal due diligence, effective risk management and enforceable security arrangements to reduce lending risks under the Cabotage Vessel Financing Fund (CVFF).

They also considered lessons from previous ship-financing initiatives and stressed the need to ensure that CVFF lending is supported by effective credit evaluation, specialised maritime finance expertise, continuous monitoring, and enforceable security arrangements.

They stated this at the maiden Olisa Agbakoba Legal (OAL) Maritime Policy Roundtable, held in Lagos, which brought together stakeholders from the banking, insurance, maritime, and ship-management sectors to examine the legal, financial, and operational structures required to support sustainable vessel financing.

The participants agreed that lessons from the failure of the CVFF’s Series 1 lending window must be carefully reviewed and studied so that Series 2 does not suffer the same fate, with sustainable ship finance ultimately dependent on private-sector bank financing supported by an enabling regulatory policy environment.

Senior Partner at OAL, Dr Olisa Agbakoba, provided a historical overview of the CVFF, tracing its development within Nigeria’s broader efforts to promote indigenous ownership and participation in the shipping industry.

Agbakoba also examined major developments in Nigeria’s maritime policy, including the establishment of the Nigerian National Shipping Line and the enactment of the Coastal and Inland Shipping (Cabotage) Act 2003.

According to him, the Cabotage Act established the CVFF to support the acquisition of vessels by indigenous shipping operators and to increase Nigerian participation in domestic coastal trade.

Speaking on de-risking lending under the CVFF, Partner at OAL, Collins Okeke, presented a legal and credit-risk framework to assist participating financial institutions in assessing maritime finance risks, protecting their loan portfolios and reducing exposure to non-performing loans.

Okeke identified credit-risk assessment, corporate and regulatory due diligence, security and facility structuring, clear default and recovery procedures as important safeguards for sustainable CVFF lending.

He said financial institutions should independently assess applicants’ financial capacity, existing debt obligations, operational experience and projected cash flow rather than rely solely on information provided by applicants.

The presentation also highlighted the need to verify beneficial ownership, regulatory compliance and the source of applicants’ mandatory equity contributions before financing is approved.

Okeke further examined measures for protecting lenders, including enforceable mortgages over financed vessels, the assignment of vessel-generated income and receivables to lenders, appropriate insurance arrangements and clear restructuring procedures where borrowers experience financial difficulties.

Managing Director of NBC Maritime Limited, Nicolas Bernard, highlighted the importance of professional ship management in protecting maritime investments and preserving the long-term value of financed vessels.

Bernard said acquiring a vessel was only the beginning of the investment process, noting that successful operations were essential to generating returns and maintaining asset value.

He also identified technical management, preventive maintenance, crew management, regulatory compliance, procurement, financial oversight and digital monitoring as important components of professional ship management.

He emphasised the importance of involving professional ship managers from the early stages of vessel selection and acquisition, noting that this can improve technical due diligence, support compliance, reduce unexpected operating costs and minimise vessel downtime.

Bernard further stressed that effective ship management could help protect shipowners’ investments, reduce lenders’ exposure to operational risks and ensure that financed vessels remain compliant and retain their value.

Discussions at the roundtable extended beyond the immediate implementation of the CVFF to the development of a sustainable framework for long-term maritime financing in Nigeria.

The participants also considered cargo-backed financing and long-term Contracts of Affreightment, which provide for the transportation of agreed quantities of cargo over a specified period, as potential mechanisms to create predictable revenue streams for indigenous shipping operators and to improve their ability to secure and repay vessel-financing facilities.