De-risking $700M CVFF: Agbakoba Launches Sustainable Ship Finance for Banks

Introduction to the Maritime Policy Roundtable

Olisa Agbakoba Legal (OAL) recently hosted its first Maritime Policy Roundtable, bringing together a diverse group of stakeholders from Nigeria’s banking, insurance, maritime, and ship-management sectors. The event aimed to explore the legal, financial, and operational structures necessary for sustainable vessel financing and to strengthen indigenous participation in the maritime industry.

Key Discussions and Presentations

The roundtable was opened by Yvonne Ezekiel, Managing Partner of Olisa Agbakoba Legal, who emphasized the importance of collaboration among various industry stakeholders. She highlighted the need for joint efforts to address challenges affecting vessel financing in Nigeria.

Dr. Olisa Agbakoba, SAN, Senior Partner at OAL, provided a historical overview of the Cabotage Vessel Financing Fund (CVFF). He traced its development within Nigeria’s broader efforts to promote indigenous ownership and participation in the shipping industry. Dr. Agbakoba also discussed 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.

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.

Addressing Lending Risks

Collins Okeke, Partner at OAL, presented a legal and credit-risk framework to assist participating financial institutions in assessing maritime finance risks. He identified several important safeguards for sustainable CVFF lending, including credit-risk assessment, corporate and regulatory due diligence, security and facility structuring, and clear default and recovery procedures.

Mr. Okeke emphasized that 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. He also highlighted the need to verify beneficial ownership, regulatory compliance, and the source of applicants’ mandatory equity contributions before financing is approved.

Protecting Lenders

Mr. 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.

Capt. Nicolas Bernard, AFNI, Managing Director of NBC Maritime Ltd., delivered a presentation on professional ship management and its role in protecting maritime investments and preserving the long-term value of financed vessels. He noted that acquiring a vessel was only the beginning of the investment process and stressed the importance of successful operations in generating returns and maintaining asset value.

Components of Professional Ship Management

His presentation identified technical management, preventive maintenance, crew management, regulatory compliance, procurement, financial oversight, and digital monitoring as important components of professional ship management. Mr. Bernard emphasized the importance of involving professional ship managers from the early stages of vessel selection and acquisition.

According to the presentation, early professional involvement can improve technical due diligence, support compliance, reduce unexpected operating costs, and minimize vessel downtime. The presentation also examined the role of professional ship managers within the CVFF financing structure, noting 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.

Lessons Learned and Future Steps

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

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. They also noted the need to examine cargo reservation systems in other jurisdictions, given the close link between cargo reservation arrangements and banks’ ability to finance vessels on viable terms.

Expanding the Framework

Discussions extended beyond the immediate implementation of the CVFF to the development of a sustainable framework for long-term maritime financing in Nigeria. Participants considered cargo-backed financing and long-term Contracts of Affreightment as potential mechanisms to create predictable revenue streams for indigenous shipping operators.

To sustain this momentum, participants agreed that the Forum should expand its membership to include ship management experts, marine insurance practitioners, marine surveyors, engineers, and valuers. This would broaden the pool of expertise available to support safe and sustainable vessel financing.

Coordination and Membership Expansion

The Forum nominated Mr. Wale Mesioye of Fidelity Bank to serve as its Coordinator, working with OAL to build a body of knowledge and expertise around ship financing. Participating banks were encouraged to develop and strengthen dedicated maritime-finance units within their institutions.

Attendees and Collaborators

Representatives from financial institutions, insurance companies, and maritime organizations attended the event. Participating organizations included Fidelity Bank Plc, Zenith Bank Plc, TAJBank, Lotus Bank, the Bank of Industry, SUNU Assurances Nigeria Plc, Capstone Insurance Brokers Limited, NBC Maritime, and Seamate Group.

Share :