Costly, short-term credit holds back Nigeria’s shipowners

Nigerian shipowners cannot get cheap, long-term credit at home to build or buy vessels that would let them compete in coastal trade, handing foreign owners a financial advantage.

Aggressive monetary policy tightening and double-digit inflation in recent years have kept commercial bank lending rates trending upwards in Nigeria.

Despite a jumbo 350-basis-point cut to the Monetary Policy Rate (MPR) bringing the benchmark down to 23 percent, commercial banking transmission lagged. The average prime lending rate climbed to 19.04 percent in September 2026 according to Central Bank of Nigeria (CBN) data while the maximum lending rate was 32.62 percent.

“Our shipowners have the capacity, expertise and ambition to contribute meaningfully to the nation’s maritime economy, but high financing costs, perceived investment risks and regulatory bottlenecks continue to limit our competitiveness,” Otunba Adewumi, president of the Nigerian Shipowners Association (NISA), told a summit organised by the Shipping Correspondents Association of Nigeria (SCAN) in Lagos.

The credit environment is unsustainable for shipowners seeking financing for capital-intensive investments like ships, which can require several years to repay.

“One Liquefied Natural Gas (LNG) tanker alone is $250 million, and repayments cannot be less than 15 years,” posited Temisan Omatseye, former director general of the Nigerian Maritime Administration and Safety Agency (NIMASA), the country’s shipping regulator. “Our banks are just traders. They give short-term loans.”

Omatseye owned tankers of his own, which were repossessed after five years due to low cash flow and patronage by cargo carriers that swung favourably to foreign ships granted waivers for coastal trade.

A NIMASA report of 2023 cites up to 1000 vessels registered for cabotage trade in Nigeria. However, Bashir Jimoh, former director-general of NIMASA wrote in a column in 2022 that about 85 percent are owned by foreign shipping operators.

Only about 5 percent of product tankers engaged by the NNPC for coastal transportation of petroleum products, Nigeria’s biggest commodity, are owned by Nigerians, leading to repatriation of the state-backed company’s $35 million annual spend on coastal lifting, Jamoh said.

International shipowners don’t face Nigeria’s credit problems.

“If I were a foreigner, I can go to a development bank in China for example and they’ll give me 85 percent financing. I’ll get one agricultural bank who will give me 20 percent equity contribution. I will get that money for almost two percent interest rate. I’ll buy a vessel from a Chinese shipyard and bring it into Nigeria,” Omatseye explained.

“As a Nigeria, already I’m out of play because I have taken mine at 25 percent. So already my cost before my markup is 22 percent over and above his rate. So even if we have the cargo, we still cannot compete,” he added.

The country’s solution is yet to yield results. Nigeria’s first experiment with state-backed ship financing in 1987 left a legacy of poor loan recovery. It has since struggled to build a financing model that works for its shipping sector.

For 23 years, the Cabotage Vessel Financing Fund (CVFF), created in 2003 to help Nigerian operators acquire vessels and build local shipping capacity with cheap accessible financing, has been accruing two percent of coastal charter rates, accumulating over $350 million as at last reported in 2023 by NIMASA. Yet, no shipowner has received a penny of it.

The contention has been the risk involved. The CVFF guidelines of 2006 documents that the CVFF forms only 50 percent of vessel acquisition costs. The company applying for the funds provides 15 percent, while commercial banks, which serve as Primary Lending Institutions (PLIs) commit the remaining 35 percent at single-digit interest rates, bearing all credit risk.

The arrangement spooked banks which had recently undergone recapitalisation. As of September, of the 20 applications submitted to participating PLIs, just one had been reviewed and forwarded for final approval from the Minister of Marine and Blue Economy.

At the summit, representatives of the United Bank for Africa (UBA), one of the PLIs said the process must become “more practicable.”

“We have so many applications but as we speak, I don’t think we’ve been able to disburse anything,” said Nelson Edoye, regional manager, UBA, Apapa.

The SOAN president said that for Nigeria to unlock its indigenous shipping potential, it needs “effective risk-sharing frameworks” and “stronger collaboration among government agencies, financial institutions, development partners and industry operators.”

Omatseye proposed a shift from relying solely on conventional loans to a private-sector-led vessel acquisition and leasing model. Under the arrangement, a financing vehicle or public-private partnership would acquire vessels and lease them to qualified Nigerian operators, retaining ownership as security and repossessing vessels in cases of default.

The model, he argued, would reduce the risks faced by lenders while allowing operators to access vessels without bearing the full cost of ownership upfront.

Bethel Olujobi

Bethel Olujobi is the Trade Correspondent at BusinessDay. He brings scarce insight into Nigeria's maritime policies and the changing currents of global commerce defining the country's position in international trade. Before this, he reported on foreign relations, migration and sports for BusinessDay. He holds a Bachelor's degree in Mass Communication, and is an alumni of the CNN Academy and the Financial Times News School. He is certified by Reuters and Google. He is based in Lagos, Nigeria. For pitches, email: [email protected]