FG misses $700m cabotage deadline 9 months later

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The Cabotage Vessel Financing Fund: A Missed Opportunity for Nigeria’s Maritime Sector

The Federal Government of Nigeria has not released the $700 million Cabotage Vessel Financing Fund (CVFF) despite the expiration of its disbursement deadline. This fund, established to support indigenous shipowners and promote the growth of the nation's maritime industry, has remained inactive for months, causing frustration among stakeholders in the sector.

The CVFF was created to assist Nigerian shipowners in acquiring vessels for domestic coastal trade. It is funded by a 2% surcharge on all cabotage contracts executed by indigenous shipowners within Nigerian waters. However, the disbursement process has been repeatedly delayed, with no clear explanation for the prolonged inaction.

In April 2025, the Minister of Marine and Blue Economy, Adegboyega Oyetola, directed the Nigerian Maritime Administration and Safety Agency (NIMASA) to initiate the disbursement of the fund. Despite this directive, over nine months later, the CVFF remains untouched. Since 2019, the government has failed to release the fund on at least ten occasions, despite repeated promises from successive administrations.

This pattern of delay has left many shipowners disillusioned and has significantly hindered the development of the country’s maritime industry. Industry experts attribute the decline of Nigeria’s indigenous fleet to these delays. The number of active vessels has dropped from 24 in 2005 to fewer than four by 2024. As a result, foreign carriers now handle 95% of Nigeria’s cargo, leading to an estimated annual loss of between $6 billion and $8 billion in freight revenue. Additionally, more than 4,000 Nigerian seafarers are unemployed due to the lack of opportunities in the domestic fleet.

Violation of the Cabotage Act

The Cabotage law, enacted in 2003, aims to protect the local shipping industry by restricting foreign vessels from operating within Nigerian waters. The CVFF was designed to support indigenous shipowners by enabling them to acquire and maintain vessels for domestic use. However, experts argue that the government has violated the law by diverting the funds into the Treasury Single Account (TSA), rather than keeping them in a commercial bank as required by the Cabotage Act.

Dr. Mkgeorge Oyung, former President of the Ship Owners Association of Nigeria, emphasized that the money collected from indigenous shipowners should be managed by a commercial bank to ensure transparency and facilitate disbursement. He noted that the money currently held in the TSA could be worth over $1 billion, further increasing the urgency of releasing the funds.

Economic Consequences of Delay

The delays in the release of the CVFF have severe economic consequences. Industry experts estimate that the country is losing between $6 billion and $8 billion annually due to the non-disbursement of the fund. Moreover, Nigeria’s maritime workforce, which once boasted over 4,000 trained seafarers, is now facing mass unemployment. Many have sought employment with foreign vessels, further eroding the country’s maritime manpower base.

At the PortNews Summit/30th Anniversary held in Apapa, Lagos, experts lamented the disappearance of Nigeria’s indigenous fleet, which is now reduced to a fraction of its former size. Dr. Eugene Nweke, Head of Research at Sea Empowerment and Research Centre (SEREC), highlighted that while 90% of Nigeria’s trade is carried by sea, less than 5% of this trade is handled by Nigerian-owned vessels. He attributed this imbalance to governance failures rather than legislative gaps.

Eligibility and Application Guidelines for CVFF

In an attempt to restart the disbursement process, NIMASA has outlined eligibility criteria for shipowners wishing to benefit from the fund:

• Equity Contribution: Applicants must contribute a minimum of 15% of the total cost of the vessel they wish to acquire.
• Loan Ceiling: The maximum loan amount available to a single beneficiary is capped at $25 million.
• Application Process: Interested shipowners must submit a formal application to NIMASA, providing business plans, financial statements, and other documentation as specified in the guidelines.

Strategic Importance of the CVFF

The CVFF is considered a critical tool for revitalizing Nigeria’s maritime industry. It is expected to:

• Enhance Indigenous Participation: Help increase the number of Nigerian-owned vessels operating within domestic waters, boosting local capacity.
• Boost Economic Growth: By strengthening the capabilities of indigenous shipowners, the fund will create jobs, develop skills, and contribute to Nigeria’s GDP.
• Reduce Dependence on Foreign Vessels: Increasing the fleet of indigenous vessels will decrease reliance on foreign ships, keeping more economic value within the country.

Several countries have implemented similar financing schemes to support their indigenous shipping industries, including the United States, South Korea, and the Philippines. Nigeria’s CVFF, once activated, could align with international best practices, helping to reposition the country’s maritime sector on the global stage.

Calls for Immediate Action

Industry leaders are urging the Federal Government to take immediate action to rectify the situation. Stakeholders are calling for the expedited disbursement of the CVFF and ensuring that the funds are used for their intended purpose: to strengthen Nigeria’s maritime industry and create employment opportunities for trained seafarers.

In response to the ongoing issues, former President of the Nigerian Bar Association (NBA), Olise Agbakoba, pointed out that the current system of disbursing the CVFF through commercial banks has been disrupted. According to Agbakoba, the government’s decision to withhold the funds in the TSA has resulted in unnecessary bureaucratic bottlenecks.

Conclusion

The prolonged delay in the disbursement of the CVFF remains a major obstacle to the growth of Nigeria’s maritime industry. While the government has renewed its commitment to the fund, there is growing concern that continued delays will undermine efforts to revitalize the sector. To match global standards, experts argue that Nigeria must ensure timely disbursement, transparency, and continuous oversight of the CVFF. Additionally, expanding the scope of the fund to support green shipping initiatives and technological upgrades could position Nigeria’s maritime sector for long-term success.