LEGAL FRAMEWORK GOVERNING SHIP LEASING AND OWNERSHIP IN NIGERIA

INTRODUCTION

 Shipping plays a vital role in Nigeria’s economy, serving as the backbone of international trade, commerce, and transportation. With its extensive coastline and array of ports, the country has developed a structured legal framework to govern ship ownership and leasing, ensuring regulatory compliance. 

This article therefore sets out to examine the legal framework governing ship leasing and ownership in Nigeria, analyzing key legislations, regulatory bodies, and international conventions. It also highlights practical challenges faced by stakeholders in the maritime sector, particularly in ship acquisition and leasing, and explores potential solutions.

A. LEGAL FRAMEWORK OF SHIP OWNERSHIP IN NIGERIA

Ship ownership in Nigeria is governed by several domestic laws and international treaties. The primary legislations include:

1.    The Constitution of the Federal Republic of Nigeria (1999, as amended)

The 1999 Constitution, specifically in section 44(3), provides the foundational legal framework for maritime governance. It vests ownership of all mineral resources, including those in territorial waters, in the federal government. The constitution also grants exclusive jurisdiction to the Federal High Court over admiralty matters, which by extension would include matters related to ship ownership and leasing, reflected in section 251(1)(g). The above provision of the constitution was recently re-confirmed by the Supreme Court in the case of NIWA &Ors. v. LASWA & Ors. (Appeal No: SC/CV/17/2018), where the apex court held that the regulatory power over the Nigerian territorial waters is vested on the Federal Government and only the National Assemble can make any law in that regard.

2.    Merchant Shipping Act (2007)

The Merchant Shipping Act is the principal legislation governing ship registration, ownership, and operation in Nigeria. A key session of the Act makes provision for registration of Nigerian-owned ships, registration of the managing owner of the ship (section 27), issuance of certificate of registration (section 30), and transfer of ship ownership.

 3.     Admiralty Jurisdiction Act (1991)

This Act defines the scope of admiralty jurisdiction exercised by Nigerian courts. It grants the Federal High Court authority over proprietary interests in a ship, or any maritime claims as provided for in section 1 (a) –(i), as well as over maritime liens and enforcement of ship mortgages, which section 2 caters for.

4.     Nigerian Maritime Administration and Safety Agency (NIMASA) Act (2007)

NIMASA is the primary regulatory body overseeing maritime safety, ship registration, and pollution control. The Act empowers NIMASA to issue ship licenses and regulate leasing agreements, enforce compliance with maritime laws and international conventions, and oversee ship financing and ownership structures, amongst others.

5.    International Conventions

Nigeria is a signatory to several international maritime conventions, including United Nations Convention on the Law of the Sea (UNCLOS) and International Convention for the Safety of Life at Sea (SOLAS), among others.

Nigeria recently ratified six Maritime Conventions and Protocols, further enriching our maritime laws, and aligning with global standards. The ratified Conventions and Protocols are:

1.    Hong Kong International Convention for Safe and Environmentally Sound Recycling of Ships 2009;

2.    International Convention on Standards of Training Certification and Watchkeeping for Fishing Vessel Personnel (STCW-F) 1995;

3.    Protocol on Limitation of Liabilities for Maritime Claims 1996;

4.     Protocol Relating to Intervention on the High Seas in Cases of Oil Pollution Casualties (Intervention Protocol) 1973;

5.    Protocol to the 1974 Athens Convention Relating to the Carriage of Passengers and their Luggage by Sea 2002; and

6.    Protocol of 2005 to the 1988 Protocol to the Suppression of Unlawful Acts Against the Safety of Fixed Platforms located on the Continental Shelf (SUA PROT 2005).

B. ELIGIBILITY REQUIREMENTS FOR SHIP OWNERSHIP

Ship ownership in Nigeria is regulated by the Merchant Shipping Act (2007) and overseen by the Nigerian Maritime Administration and Safety Agency (NIMASA). The following entities are eligible to own and register ships in Nigeria:

1.    Nigerian Citizens – Individuals who are Nigerian nationals can own and register ships under the Nigerian flag.

2.    Corporate Entities or Partnerships – Companies incorporated in Nigeria with their principal place of business in Nigeria are eligible to register ships.  The minimum share capital for any vessel owned by a Nigerian company is N25,000,000. Foreign investors not exceeding 5 can co-own ships with Nigerian entities, provided they comply with the requisite law.

3.    Other Persons as Prescribed by the Minister of Transport – By virtue of section 18 of the afore-mentioned Act, the Minister has the authority to prescribe additional eligibility criteria through regulations.

C. REGISTRATION OF SHIPS IN NIGERIA

Ship registration is a crucial process that grants vessels the legal right to operate under the Nigerian flag. The Nigerian Ship Registration Office (NSRO), under NIMASA, manages ship registration.

Article 91 of UNCLOS III (1982) requires every state to issue ships which it has granted the rights to fly its flag a document to that effect which is known as the “certificate of registry”. The Nigerian Ship Registration Office (NSRO) is empowered to register ships in accordance with the following Acts:

a)    Merchant Shipping Act – Sections 5-81 (part ii & iii)

b)    NIMASA Act 2007 – Sections 28-32 (part viii)

c)     Coastal and Inland Shipping Act – Sections22-28 (part v)

D. NIGERIAN SHIP REGISTRATION REQUIREMENTS AND PROCESS

To register a ship in Nigeria, the following steps must be completed:

1.    Application submission to the Director-General with all supporting documents (for a company, company’s particulars like Copy of certificate of Incorporation, CTC of Memorandum and Articles of Association, CTC of Form CAC7 (Particulars of Directors), CTC of Form CAC2 (Allotment of Shares), Company’s current tax clearance certificate, Company’s Bank statement or reference letter and Declaration of ownership form (to be issued by the Ship Registry).

2.    Payment of requisite Fees

3.    Issuance of Certificate of Registry.

E. TYPES OF SHIP REGISTRATION

Nigeria offers different categories of ship registration:

• Register for ships under construction
• Provisional Registration:
• Flag Registration
• Register of licensed ships below 15 gross tons
• Bareboat Registration (Flag/Cabotage)
• Cabotage Registration (Wholly Nigerian Owned, Joint Venture, Foreign Category) Registers Maintained by the Nigerian Ship Registry
• Register for Floating Production Storage and Offloading (FPSO) and Floating Storage and Offloading (FSO)
• Register for merchant ships.
• Register for fishing vessels.
• Register for ship under the bareboat charter and other charters exceeding 12 months
• Special Cabotage Register for Wholly Nigerian Owned Vessels.
• Special Cabotage Register for Bareboat Chartered Vessels.
• Special Cabotage Register for Foreign-Owned Vessels
• Register of Boats with Engine of 200 Horse-Power and Above.

F. SHIP LEASING IN NIGERIA

Ship leasing is a common practice in Nigeria’s maritime industry, allowing businesses to acquire vessels without outright purchase. Ship leasing agreements are of different types, namely;

a.   Bareboat Charter: The lessee assumes full control of the vessel, including crew management and operational responsibilities.

b.   Time Charter: The shipowner retains control over the vessel while leasing it for a specified period.

c.     Voyage Charter:  The vessel is leased for a single voyage, with the shipowner responsible for operational aspects.

G. CHALLENGES IN SHIP LEASING AND OWNERSHIP IN NIGERIA

Despite the legal frameworks available, ship leasing and ownership in Nigeria face several challenges:

1.    High Cost of Ship Acquisition – Ship ownership and leasing require substantial financial investment. Many Nigerian businesses struggle with access to financing due to stringent lending conditions and high interest rates.

2.    Bureaucratic Bottlenecks in Ship Registration – The process of registering ships with NIMASA is often cumbersome, involving multiple layers of approvals and documentation. Delays in registration can hinder maritime operations.

3.    Regulatory Compliance and Enforcement Issues – While Nigeria has strong maritime laws, enforcement remains inconsistent. Some shipowners and lessees circumvent regulations, leading to safety risks and operational inefficiencies.

4.    Limited Local Shipbuilding Capacity – Nigeria relies heavily on foreign-built ships, increasing costs and dependency on international markets. The absence of a robust local shipbuilding industry limits opportunities for domestic ownership.

H. GOVERNMENT INCENTIVES FOR SHIP FINANCING TO SHIP OWNERS

The Nigerian government have overtime introduced some incentives to promote ship financing

1.    Cabotage Vessel Financing Fund (CVFF) – The Federal Government has recently launched the application process for the long-awaited disbursement of the Cabotage Vessel Financing Fund (CVFF), enabling eligible Nigerian shipping firms to access up to $25 million each in structured loans for vessel acquisition.

2.    Maritime Infrastructure Development Fund: Supports investment in shipbuilding.

3.    Foreign Direct Investment (FDI) Incentives:  This initiative encourages foreign investors to partner and invest in Nigerian entities. Shipping would undoubtedly benefit in foreign investors venturing into ship ownership and partnership with Nigerian entities

4.    Ship Acquisition and Ship Building Fund (SASBF) 

CONCLUSION

Nigeria has a robust legal framework governing ship leasing, ownership and registration which comprises both domestic laws and international conventions to ensure maritime security and efficiency. However, practical challenges such as financing constraints, bureaucratic hurdles, and enforcement gaps continue to affect the industry. Addressing these issues through policy reforms, improved regulatory oversight, and investment in local shipbuilding will enhance Nigeria’s maritime sector, specifically ownership of ships and leasing ventures.

At AO2LAW, our Financial and Maritime Services Advisory Practice, housed within the Commercial and Criminal Law Practice Group (CCLP), provides top-tier legal and regulatory support to shipping/maritime companies to navigating the legal terrane both locally and internationally. We offer strategic guidance on registration, licensing, compliance, raising capital, corporate governance and risk management, leveraging our expertise in financial services regulatory frameworks.

For further information on the foregoing (none of which constitutes legal advice) or related matters, please contact us generally at cclp@ao2law.com