Nigerian shipowners are facing difficulties competing in the country’s coastal shipping industry due to limited access to affordable, long-term financing for vessel acquisition and development.

The high cost of borrowing, driven by tight monetary policies and persistent inflation, has continued to discourage investment in the capital-intensive maritime sector, giving foreign shipping operators a financial advantage.

Despite a 350-basis-point reduction in the Monetary Policy Rate by the Central Bank of Nigeria, bringing the benchmark rate to 23 per cent, commercial lending rates have remained high.

CBN data show that the average prime lending rate rose to 19.04 per cent in September 2026, while the maximum lending rate stood at 32.62 per cent.

Industry stakeholders say the prevailing credit conditions are unsuitable for shipowners who require substantial capital and several years to recover investments in vessels.

The financial difficulties have had serious consequences for indigenous operators. One shipowner, Omatseye, reportedly lost his tankers to repossession after five years of struggling with low cash flow and limited patronage, as cargo operators increasingly favoured foreign vessels operating under coastal trade waivers.

Figures from the Nigerian Maritime Administration and Safety Agency, NIMASA, indicate that up to 1,000 vessels were registered for cabotage trade in Nigeria in 2023. However, a former Director-General of the agency, Bashir Jamoh, disclosed in a 2022 article that about 85 per cent of the vessels were owned by foreign shipping operators.

Jamoh also revealed that Nigerians owned only about five per cent of the product tankers engaged by the Nigerian National Petroleum Company Limited for coastal transportation of petroleum products.

According to him, this results in the repatriation of about 35 million dollars annually spent by the state-backed oil company on coastal lifting services.

Efforts to address the financing challenge have produced limited results over the years.

Nigeria’s first attempt at state-backed ship financing in 1987 was reportedly characterised by poor loan recovery, while subsequent efforts to establish a sustainable funding framework for indigenous operators have faced similar challenges.

One major intervention, the Cabotage Vessel Financing Fund, CVFF, established in 2003 to support vessel acquisition and strengthen local shipping capacity, has accumulated more than 350 million dollars from a two per cent levy on coastal charter rates, according to NIMASA’s 2023 report.

Despite operating for more than two decades, the fund has yet to disburse money to any Nigerian shipowner.

The delay has largely been attributed to concerns over lending risks and the structure of the financing arrangement.

Under the 2006 CVFF guidelines, the fund is expected to provide 50 per cent of the cost of vessel acquisition, while the beneficiary contributes 15 per cent. Commercial banks, serving as Primary Lending Institutions, are responsible for providing the remaining 35 per cent at single-digit interest rates and bearing the credit risks.

The arrangement has reportedly discouraged participating banks, particularly following their recent recapitalisation exercises.

As of September 2026, only one of the 20 applications submitted to participating financial institutions had been reviewed and forwarded for final approval by the Minister of Marine and Blue Economy.

At a maritime summit, representatives of United Bank for Africa, one of the participating lending institutions, called for a more practical approach to the financing process.

The President of the Shipowners Association of Nigeria, SOAN, said unlocking the country’s indigenous shipping potential would require effective risk-sharing arrangements and stronger collaboration among government agencies, financial institutions, development partners and industry operators.

Omatseye also proposed moving away from exclusive reliance on conventional loans towards a private-sector-led vessel acquisition and leasing arrangement.

Under the proposed model, a financing vehicle or public-private partnership would acquire vessels and lease them to qualified Nigerian operators, retaining ownership as security and recovering the vessels in cases of default.

He argued that the arrangement would reduce the financial exposure of lenders while enabling indigenous shipowners to access vessels without bearing the full cost of ownership upfront.

Stakeholders believe that addressing the financing gap remains critical to strengthening local participation in coastal shipping, retaining more revenue within the country and improving the competitiveness of Nigeria’s maritime industry.