Nigeria: Opportunities in Nigeria’s Cabotage: Foreign Investors to get a Piece of the Cake!

Last Updated: 22 July 2005
Article by Inam Wilson


Nigeria made a bold attempt to change the face of maritime business within its coasts when it enacted the Coastal and Inland Shipping (Cabotage) Act 2003.

The Guidelines on Implementation of Coastal and Inland Shipping (Cabotage) Act 2003 was issued in April 2004 to facilitate implementation of cabotage.

The Act became enforceable May 2004.

Though designed to restrict foreign participation in Nigeria’s domestic coastal trade, nevertheless a lot of opportunities exist for foreign involvement.

Part 1A

Understanding Nigeria’s Cabotage Regime


Cabotage has been defined as follows:

"the carrying on of trade along a country’s coast; the transport of goods or passengers from one port or place to another in the same country. The privilege to carry on this trade is usually limited to vessels flying the flag of that country." – Black’s Law Dictionary (8th Ed.) pg. 215.

"the navigation and movement of ships in coastal waters; restriction of the use of coastal waters and airspace by a country to its own domestic traffic" - The Webster Dictionary.

Section 2 of Coastal and Inland Shipping (Cabotage) Act 2003 incorporates the above definitions and in addition defines cabotage as:

  • the carriage of goods and passengers by vessel from any place above or under Nigerian waters to any place above or under Nigerian waters in relation to the exploration, exploitation or transportation of mineral or non-living natural resources;
  • engaging, by vessel, in any other marine transportation activity of a commercial nature in Nigerian waters;
  • carriage of any goods or substances whether or not of commercial value within Nigerian waters.

A "place above Nigerian waters" as used in the definition above means – "any vessel, offshore drilling unit, production platform, artificial island, sub-sea installation, living accommodation, storage structure, loading or landing platform, dredge, floating crane, pipe laying, barge, pipeline and any anchor cable or rig pad used in connection therewith."


Nigerian Cabotage Regime aims to:

  • Restrict the use of foreign vessels in domestic coastal trade;
  • Promote development of Indigenous tonnage;
  • Establish cabotage vessel financing fund;
  • Reserve the bulk of coastal trade for vessels built, owned, registered in Nigeria and manned by qualified Nigerian seafarers.
  • Stimulate and expose Nigeria's indigenous shipping firms to shipping business in the coasts as a stepping stone to deep sea/international shipping;
  • Encourage acquisition of shipping technology by creating and diversifying employment opportunities in the industry;
  • Improve environmental safety;
  • Protect the nation's security interests;
  • Enhancing domestic waterborne transportation;
  • Increase national fleet/tonnage;
  • Develop ship building and repair capability;
  • Create opportunities for employment;
  • Conserve foreign exchange;
  • Protect national economy and security, etc.

High Points of the Cabotage Act

Reservation of cabotage trade for Nigerians – Sections 3-8;

Allowance of limited foreign participation in areas where Nigerians lack capacity through grant of waivers – Sections 9 - 14;

Restricted licence for foreign vessels to be registered for participation in cabotage trade – Sections 15 – 21;

Special register for vessels and ship owning companies engaged in cabotage – Sections 22 – 28;

Establishment of a special cabotage enforcement unit under the National Maritime Authority (NMA) – Sections 30 – 32;

Creation of Cabotage Vessel Financing Fund (CVFF) to promote development of indigenous ship acquisition capacity by provision of financial assistance to Nigerian operators – Sections 42 – 45;

Vessels operating under a valid coastal trade licence under the Merchant Shipping Act (MSA) or Sea Fisheries Act will continue till expiration of licence – Section 52.

Part 1B

Cabotage Implementation In Nigeria

Legal Regime

The main instruments regulating cabotage are:

  • The Cabotage Act 2003;
  • The Cabotage Guidelines 2004;

Additionally the following laws are relevant in so far as they are consistent with the Cabotage Act:

  • Merchant Shipping Act;
  • Admiralty Jurisdiction Act;
  • Admiralty Jurisdiction Procedure Rules;
  • Companies & Allied Matters Act;
  • Nigerian Enterprises Promotion Act;
  • Any other existing law.

Implementation Agencies

The following government agencies are responsible for implementing cabotage:

  • Federal Ministry of Transport;
  • National Maritime Authority –
    • Registrar of Ships;
    • Cabotage Enforcement Unit;
    • Collecting Agency for Cabotage Vessel Fund;
    • Seafarers Training & Certification Dept;
  • Nigerian Inland Waterways Authority;
  • Joint Maritime Labour Industrial Council;
  • Nigerian Ports Authority;
  • Nigerian Customs, Police, & Navy.

Cabotage Trade

The Cabotage Act reserves for Nigerians and Nigerian vessels the carriage of goods and passengers in the following circumstances:

  • cargo and passengers originating from one port or point in Nigeria to another within Nigeria carried on, through or under Nigerian waters;
  • Cargo originating from Nigeria destined for Nigerian ports/market but carried via port outside Nigeria;
  • Cargo carried from one point in Nigeria to another whether or not of commercial value.

Cabotage Trade Areas

The cabotage law is enforceable against any vessel trading and lying in or along the following areas in Nigeria:

  • Nigerian Inland Waters
  • Nigerian Coastal Waters
  • Nigerian Territorial Waters
  • Nigeria's Exclusive Economic Zone
  • Islands (natural/artificial) within Nigerian Waters

The Cabotage Enforcement Unit has so far identified the following facilities within the cabotage trade area for cabotage enforcement:

  • 6 major Seaports;
  • 10 oil terminals;
  • 168 jetties; and
  • all offshore oil installations and structures.

Registration of Cabotage Vessels

The Cabotage Act requires the following vessels to be registered by the Registrar of Ships in a Special Cabotage Register before they can engage in cabotage trade:

  • passenger vessels
  • Crew boats
  • Bunkering vessels
  • Fishing trawlers
  • Barges
  • Off-shore service vessels
  • Tugs
  • Anchor handling tugs and supply vessels
  • Floating petroleum storage and Offtake facilities
  • Dredgers
  • Tankers
  • Carriers; and
  • Any other craft or vessel used for carriage on, through or under water of persons property or any substance whatsoever.

The requirement for registration affects:

  • Wholly Nigerian owned vessels;
  • Joint Venture owned vessels;
  • Bareboat chartered vessels;
  • Foreign owned vessels; and
  • Vessels requiring temporary registration.

Waivers & Licences

Vessels not eligible to participate in the Cabotage trade must obtain waiver before registration in the Special Cabotage Register.

Vessels requiring waiver include:

  • Vessels not wholly owned by Nigerians, that is:
    • Joint Venture owned vessels;
    • Chartered vessels other than a Bareboat charter;
    • Wholly Foreign owned vessels;
  • Vessels not wholly manned by Nigerians;
  • Vessels not built in Nigeria; and
  • Vessels not registered in Nigeria i.e. a foreign flag.

Foreign vessels must first obtain a licence to trade in the coastal and inland waters before registration in the Special Cabotage Register.

Waivers are granted on the basis of non-availability and lack of capacity by Nigerians in the area the waiver is required.

In granting waivers, priority is given to vessels and shipping companies owned by Nigerians and foreigners under a Joint Venture arrangement followed by vessels registered in Nigeria and owned by a shipping company registered in Nigeria.

Cabotage Vessel Financing Fund

NMA is required to collect the Cabotage Fund and deposit it in commercial banks;

The Fund is to be generated from:

  • 2% surcharge of contracts performed by vessels engaged in cabotage;
  • Tariffs, fines and fees for licensing and waivers;
  • Interest paid on and repayment of principal sum of loans granted from the Fund;
  • Any other sum approved by the National Assembly.

The Guidelines for administration of the Fund is still being awaited.

Cabotage Fees & Tariffs

The following fees are payable in respect of cabotage:

  • Waiver on manning – from N50,000 – N100,000;
  • Waiver on ship building – USD1,000;
  • Waiver on ownership -
    • Foreign vessel – USD50,000;
    • JV Vessel – USD5,000;
    • Bareboat Vessel – N100,000;
  • Temporary Registration – USD2,000;
  • Registration of ship Mortgage – N50,000;
  • Exemption Fees – N50,000;
  • Ship Registration –
  • 1 - 1,000gt –
    • Foreign vessel – USD1,000;
    • Nigerian – N50,000.
  • 1,000 – 10,000gt –
    • Foreign vessel – USD1,500;
    • Nigerian – N75,000.
  • Every subsequent 1,000 –
    • Foreign vessel – USD250;
    • Nigerian – N15,000.

Part 2

Opportunities In Nigeria’s Cabotage Regime

Cabotage Opportunities

Cabotage will create opportunities for investments in the following areas:

  • Fishing industry;
  • Passenger ferry services;
  • Towage & Salvage operations;
  • Dredging (coastal and inland waterways);
  • Liquid bulk carriage e.g. chemicals, oil and its derivatives;
  • Dry bulk carriage e.g. iron ore, coal, grains;
  • General cargo (feeder and inland transport);
  • Container trade;
  • Marine engineering spare parts supplies;
  • Shipbuilding and repair (ship yards, repair yards, emergency repair facilities & anchorage);
  • Maritime auxiliary services (freight forwarding services, storage and warehousing, maritime agency services, container/depot services);
  • Ship, Port and boat supplies (bunkering, garbage and ballast waste disposal, victualling, communications and electrical supplies);
  • Maritime insurance and finance sector (credit facilities for fleet and business expansion);
  • Training /Technical Assistance;

There are also opportunities for investors who can set up facilities in Nigeria to build specialized vessels (e.g. flare knockout vessels; slug catchers; surge vessels; pressure vessels) and marine structures (e.g. buoys, piles, jackets, & other mobile units) to support various oil & gas installations.

Foreign Participation In Cabotage

Cabotage is a means to an end & not an end itself. The ultimate end of cabotage are;

  • Enhancing domestic waterbourne transportation;
  • Increase national fleet/tonnage;
  • Develop ship building and repair capability;
  • Create opportunities for employment;
  • Conserve foreign exchange;
  • Protect national economy, environment and security;

The above objectives can not realistically be achieved without the injection of foreign investments in terms of technology, financing, and expertise;

Recognizing this need, the cabotage regime has been designed to allow foreign participation in areas where Nigerians lack capacity. Nigeria presently lack the technology, finance, and expertise for ship building and acquisition;

So far there is no definite policy and plan in place to develop capacity for ship building, repair and acquisition or for training qualified Nigerian seafarers which are the bedrock of cabotage;

It is not unreasonable in the circumstances to posit that waivers will continue to be issued to foreigners so long as Nigerians do not show sufficient capacity in these areas;

The Cabotage Vessel Finance Fund cannot in the short term meet the huge financial outlay required for acquisition of vessels and establishment of ship building and repair facilities;

The Cabotage Fund is overshadowed by its predecessor, the Ship Acquisition & Ship Building Fund which was a massive failure;

Pending release of the guidelines for disbursement of the Fund, the pertinent questions to ask is:

  • Will banks lend at commercial terms or rates?
  • If yes very few Nigerians will meet the requirements for obtaining credits especially regarding provision of securities.

The best chance Nigerians have to participate in cabotage for now remains to enter into a Joint Venture arrangement with foreign investors.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions