Law Review Nigerian Law Trade and Commerce


Aside from significantly contributing to the country’s revenue, shipping is an essential aspect of the oil and gas sector, the stronghold of Nigeria’s economic, sociopolitical, and infrastructural development, thus, it is undeniable that shipping is pivotal to the economic development of Nigeria. Consequently, the active participation of Nigerians in the shipping subsector, as well as other sectors, is imperative, climaxing therefore in the promulgation of the Coastal and Inland Shipping Act (2003), generally known as the “Cabotage Act” in Nigeria. A question which readily comes to mind is whether the Nigerian government has been successful in its bid to assure the needed development of indigenous participation in the maritime sector. This article is directed at examining in detail and analyzing the effects as well as the advantages of implementing the Cabotage policy and to determine whether the objectives listed for the enactment of the Act has been achieved since its enforcement in 2004 till date, as well as the problems encountered in implementation and the extent to which the Nigerian Maritime Administration and Safety Agency (NIMASA) has been able to ensure compliance.

The word ‘Cabotage’ is derived from the French word “caboter” which means to sail coastwise or ‘by the capes’. Cabotage is the carrying 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 vessel flying the flag of that country[1]. The relevant law in Nigeria is the Coastal and Inland Shipping Act (2003) which defines Cabotage as:

“a) the carriage of goods by vessel, or by vessel, and any other mode of transport, from one place in Nigeria or above Nigeria waters to any other place in Nigeria or above Nigeria waters, either directly or via a place outside Nigeria and includes the carriage of goods in relation to the exploration, exploitation or transportation of the mineral or non-living natural resources of Nigeria whether in or under Nigerian waters;b) the carriage of passengers by vessel from any place in Nigeria situated on a lake of river to the same place, or to any other place in Nigeria, either directly or via a place outside Nigeria, other than as an in-transit or emergency call, either directly or via a place outside Nigeria;c) the carriage of passengers by vessel from any place in Nigeria to any place above or under Nigerian waters to any place in Nigeria, or from any place above Nigerian waters to the same place or to any other place above or under Nigerian waters where the carriage of the passengers is in relation to the exploration, exploitation or transportation of the mineral or non-living natural resources in or under Nigerian waters; andd) the engaging, by vessel, in any other marine transportation activity of a commercial nature in Nigerian waters and, the carriage of goods or substances whether or not of commercial value within the waters of Nigeria”[2]

What can be gleaned from the above definitions is that the Cabotage Law is the law reserving the coastal trade of a nation to vessels flying its national flag. It is the law responsible for restricting the coastal and inland water trade in a country to vessels flying its state flag. Thus, to properly analyze the impact, efficacy, implementation as well as the compliance of the Cabotage Act, it’s imperative to have a look at the Act itself and the provisions of its sections as it relates to this.

One of the standout reformative moves made by the Government of the country was the bold step to effect a change in the face of maritime business within the Nigerian Coast through, the implementation of the Coastal and Inland Shipping (Cabotage) Act, 2003 by the former president, Olusegun Obasanjo. This was seen as a marked improvement and outright reformation in the maritime sector. The Coastal and Inland Shipping (Cabotage) Act was enacted in the year 2003 but it came into operation in May 2004. The major objectives which were intended to be achieved with the implementation of the Act include the restriction of the use of foreign vessels in the domestic coastal trade and the promotion of the development of indigenous tonnage[3] with the aim of protecting and empowering Nigerians in the maritime sector. This development was seen by the maritime industry stakeholders as one which offers limitless opportunities for not only those in the shipping business but to the nation as a whole.

In all, the purport of the Act is that all economic activities including carriage, whether of passengers or cargo, within Nigeria’s coastal waters should be indigenized and reserved for Nigerians.

”A vessel other than a vessel wholly owned and manned by a Nigerian citizen, built and registered in Nigeria shall not engage in the domestic coastal carriage or cargo and passengers within the Coastal, Territorial, Inland Waters, Island or any point within the waters of the Economic Zone of Nigeria”[4]

Apart from the above general restriction provided for by Section 3 of the Cabotage Act, which generally applies to the ownership, manning, building and registration of vessels by Non- Nigerians, it is also applicable to the carriage of all manner of cargo and passengers, its influence extends to towage and salvage services. Consequently, there is the restriction of participation in towage activities in the nation’s coastal waters to only tug or vessel strictly owned by a Nigerian.[5]Although, foreign vessels are restricted from participating in towage activities, the Act allows a foreign vessel to render assistance to persons, vessels, or aircraft in danger or distress in Nigerian waters[6] this is in line with the provisions of the Salvage Convention and other International Laws which provides that vessels in distress should be assisted by other passing vessels[7]. It is important to state here that there is no provision in the subsection that the vessel to be used in towage must be built or registered in Nigeria neither does it have to be manned by Nigerians, once the vessel is owned by a Nigerian, it’s enough.

It should be noted however that even though foreign vessels are barred from trading and economic activities within Nigeria’s coastal waters, some foreign vessels engaged in salvage and emergency activities; those engaged in any ocean research activity commissioned by any department of the government responsible for such research; those operated or sponsored by a foreign government that has sought and received the consent of the Minister of Foreign Affairs to conduct Marine Scientific Research. They are allowed to operate within the coastal waters but the approval of the minister must first be obtained. The Minister before granting the approval must be satisfied that the operation is one that is beyond the capacity of Nigerian-owned and operated vessels.[8]

As a result of the fact that Nigeria does not have the sufficient domestic capacity to contribute effectively in both ownership and infrastructural aspects, thus, limiting the volume of business trade they can participate in the Cabotage trade. This sad reality is what necessitated the adoption of a Cabotage policy where there is the use of waiver. Based on the provisions of the Cabotage Act, the Nigerian Cabotage Act operates its waiver based only on the ground of non-availability. In other words, waiver will only be granted to foreign vessels if either of the four major requirements can be satisfied[9]. The granting of waivers by the Minister is a discretionary power and he cannot be compelled to exercise it. However, where an applicant feels strongly about the Minister’s refusal, he may seek judicial review of the Minister’s exercise of his discretion.

It is important to note that even where the fact of inadequacy of indigenous capacity is established, the Act provides that a waiver should be granted by the Minister, in the first instance, to a shipping company and vessels owned by a joint venture agreement between Nigerian citizens and Non- Nigerians and the shareholding or equity participation of the Nigerian Joint Venture partner in the vessel and the shipping company shall not be less than 60% free from any trust or obligation in favour of non-Nigerians[10]. It is only in the absence of such joint venture company that in the second instance, the waiver may be granted to a vessel registered in Nigeria and owned by a shipping company registered in Nigeria, provided that the applicant company complies with the relevant provisions of the Act. The policy consideration here is to make it possible for Nigerian operators, in the spirit of the Cabotage regime, to participate in the coastal maritime trade thereby acquiring relevant experience, even in the present circumstance of gross domestic inadequacy.

Perhaps from the intention of the framers of the Act, the desired effect of the Cabotage Act can be gleaned from its preamble which provides that “this Act restricts the use of foreign vessels in domestic coastal trade, promotes the development of indigenous tonnage and establishes a Cabotage vessel financing fund”.[11]

Thus, it can be inferred that an intended effect of the Act is the protection of indigenous shipping companies from death and incapacitation which results from the domination of the carriage of cargo within Nigerian waters by foreign vessels and where the provisions of the Act are strictly adhered to, the local shipping industry will definitely grow to the extent that Nigerian citizens will achieve dominance in shipping activities which take place within the country’s territorial waters.

Another intended effect is to empower indigenous shipping companies to build their capacity in acquiring more vessels as this will increase the tonnage the nation needs in order to have some leverage in international maritime negotiations.
More so, employment opportunities will be created for Nigerians willing to work in the industry and there will be development of manpower as the seafarers will be subjected to training from time to time to increase their knowledge and expertise. The growth of the industry will consequently increase the nation’s revenue base and this will lead to conservation of foreign exchange that is usually used in paying for services rendered by foreign shipping companies.

The implementation of the Cabotage Act will also contribute greatly to attainment of national security as the availability of indigenous fleet and seamen especially in times of conflict will assure an effective policing of the waterways. Overall, the unnecessary hurdles put in place by foreign operators to frustrate the entry of new indigenous operators into the maritime industry, thereby, allowing for maximum growth and expansion within the sector.

The conceptualization of the Coastal and Inland Shipping Act in 2003 gave lots of hope to the stakeholders in the maritime industry as they were almost certain sure that the regulation would usher in a new dawn in the domestic shipping business, but 16 years after, it is obvious that the implementation of this Act is more like a herculean task for the regulator.

One of the challenges is that of the provision of funds needed for the procurement of new vessels and other marine equipment which are quite expensive. Although, the Act made provision for the Cabotage Vessel Financing Fund (CVFF)[12] which is expected to be driven from the 2% surcharge of contract sum on coastal trade cargo, tariffs, fines and fees realized from the grant of waivers and licenses and interest generated from the fund[13]. In 2007, the National Assembly approved the Cabotage Vessel Financing Fund Guidelines, there is no prove that the local shipping companies have had access to it as the funds from the CVFF are yet to be disbursed to beneficiaries and where funds are loaned from other financial institutions, the interest rate are back breaking, that is if they are eventually loaned.

Another problem is the grant of waivers and licenses. The provision of the Cabotage Act especially Sections 9-14 empowers the minister the power to grant waivers this as stated earlier was as a result of the fact that as there were no adequate manpower and the technical knowhow needed for the catering of all activities which are carried out in the indigenous shipping industry. The use of the discretionary power should have been lessened as time goes by but the reverse is the case. It has of a fact been observed that sometimes, foreign vessels were allowed to operate even before their waiver application is approved. It should also be pointed out here that the discretionary power granted to the minister by the Act is one that can be subjected to abuse.

The lack of experienced and properly trained seafarers, lack of capacity in building new ships by the existing ship building industry, which most times are only involved in the repairs of vessels only is another problem facing the implementation of the Cabotage Act.

In all, it is pertinent to state that government bureaucracy, including innate corruption by government agencies, further hampers the finance of ship acquisition and ship building in Nigeria. The embezzlement of the funds disbursed by the government coupled with the inability of the relevant authority to monitor the use of the funds, thereby rendering nugatory the objectives for setting up the fund.

The Nigerian Maritime Administration and Safety Agency (NIMASA), in a bid to actualize a successful coastal and inland trade regime and to ensure total compliance to the Cabotage Act introduced a new NIMASA Cabotage Compliance Strategy (NCCS) in August 2018 and according to the Director-General of NIMASA, the agency would no longer consider applications for grant of waiver on manning for prescribes categories of officers in vessels engaged in cabotage trade whilst special applications for captains, chief engineers, chief officers and 1st mate, in the absence of qualified Nigerians, would only be considered on merit and based on the condition that such an organization will plan to train a Nigerian and make a transition plan to ensure that the Nigerian takes over the job within a year.

Moreso, NIMASA is currently advocating a long-term economically beneficial solution of training Nigerians to man the Cabotage vessels. Thus, the agency has trained more than 2,000 Nigerians under the Nigeria Seafarers Development Programme and it has pursued the issue of sea-time training for the graduates through full sponsorship of their placement on ships, in partnership with some international institutions that have access to ocean going training vessels.

The agency has also made significant progress in the manning aspect of the Cabotage law implementation, with Maritime Academy of Nigeria (MAN) producing the required middle level manpower for the maritime industry and National Seafarers Development Programme (NSDP) supplying the high-end manpower requirements. Thus, most vessels trading within the country’s coastal waters now have at least 70% Nigerian content in terms of manning. In addition, the Agency is collaborating with the Nigerian Content Development and Monitoring Board to do a five-year skills demand programme, which would give the agency deeper insight into the manpower needs of the industry.[14]NIMASA in a bid to increase the ship building capacity has launched an audit of shipyards in the country, in conjuction with Nigerian Content Development and Monitoring Board, to see how they can be assisted to improve capacity. The aim is to ensure that most of the vessels in Nigeria are built in the country.

There is no doubt that the Cabotage policy if properly implemented will in the long run boost the Nigerian Shipping Industry and the economy as a whole. Thus, there is the urgent need for the radical disbursement of the Cabotage Vessel Finance Fund (CVFF) to enable local ship operators acquire new vessels and increase their fleet size as poor funding has been impeding the local operators from producing enough tonnage to be able to compete with foreign firms and gain more businesses in the cabotage trade.

There might also be the need to amend the Cabotage Act Particularly Part III of the Act which provides for waiver this is to curb the problems of arbitrary waiver grants to foreigner in the face of qualified and capable local companies.


Omolola Oyewole Omolola Oyewole is a lagos based legal practitioner who is presently creating a niche for herself in Maritime Law. She is currently serving as an associate at Femi Atoyebi and Co. Omolola also has interest in commercial and corporate law as well as Human Resources and Leadership.
She is an avid reader and blogs in her spare time.


[1] Black’s Law Dictionary, 9th Edition, p. 230.

[2] Section 2 of the Cabotage Act

[3] Preamble to the Coastal and Inland Shipping (Cabotage) Act 2003

[4] Section 3 of the Cabotage Act

[5] See the provisions of Section 4(1) of the Cabotage Act

[6] See the provisions of Section 4(2) of the Cabotage Act

[7] See Article 10,11 & 12 of the Salvage Convention and Article 18 and 21 of the United Nations Convention on Laws of the Seas (UNCLOS)

[8] See the provisions of Section 8 of the Cabotage Act

{9] See the provisions of Sections 9-11 of the Cabotage Act

[10] See the provisions of Section 12(a) of the Cabotage Act

[11] See the preamble to the Cabotage Act, 2003

[12] See part VIII of the Cabotage Act

[13] See section 43 of the Cabotage Act

[14] the Guardian Newspaper, Wednesday, March 27, 2019





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1 comment

  1. Greetings Omolola Oyewole Esq!
    I want to deeply thank you for this educating apt appraisal on the Cabotage Act.
    My worries is always about the inability of Government, Agencies and parastatal in developing local content with regards to Indigenous capacity to build, manned and own ships in line with the international standard.
    Even as provided for in the Cabotage Act(Cabotage Vessel Financing Fund and other related laws like Local Content Act of 2010.


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