NIGERIA Law and Practice Contributed by: Adedoyin Afun and Michael Abiiba, Bloomfield LP
also state the timeline when the mortgage is to be duly registered with the relevant authorities. • Undertakings: sets out the covenants that the mortgagor agrees to be bound by for the tenor of the mortgage – insurances, charters, security, financial, operational and environmental. • Assignment of earnings, insurance, and requisition compensation: this covers the assignment of the vessel’s earnings, insurance, and requisition com - pensation to the mortgagee as additional security. • Mortgagee’s power to protect security: allows the mortgagee to take necessary steps to safeguard the security, including remedying the mortgagor’s failures. • Event of default: identifies the circumstances that entitle the mortgagee to exercise its enforcement rights under the mortgage. • Mortgagee’s power of enforcement: sets out the mortgagee’s rights and remedies upon the occur - rence of an event of default. • Attorney: appoints the mortgagee as attorney of the mortgagor to act in relation to the vessel, usu - ally triggered by a listed event of default. • Proceeds of sale: sets out the order in which the proceeds from the mortgage (be it via a sale of the vessel or the vessel’s insurance proceeds) are to be applied. • Governing law and dispute resolution: the ship mortgage typically confirms Nigerian law and Nige - rian courts as the governing law and primary forum for resolving disputes arising under the transaction. The mortgage also recognises that disputes may be commenced in the courts of any jurisdiction (other than Nigeria) where the vessel may be found. It is also common for the mortgagee to retain an exclusive right to refer disputes to arbitration, not - withstanding the court jurisdiction provisions, with the terms of the arbitration agreement expressly set out therein. The most common ship loan financing transactions are in relation to the purchase and lease of second- hand vessels, building/construction of new vessels and working capital. These transactions are usually funded through loans from banks and other financial institutions, as well as by shareholders and intercom - pany/related entities.
Security packages other than mortgages include: • personal guarantees – from the shareholder(s) and/ or director(s) of the borrower; • corporate guarantees from a guarantor, usually a related company; • assignment of the earnings of the ship; • assignment of insurances of the ship; • assignment of requisition compensation; • deed of account(s) charge; and • charge other assets of the borrower/guarantor. 2.2 Ship Leasing Ship leasing transactions are increasing in Nigeria and the growth is most evident in the oil and gas value chain. The Nigerian Upstream Petroleum Regulato - ry Commission (NUPRC) reported that Nigeria’s rig count rose from 8 in 2021 to 69 in 2025, representing a 762.5% increase. This is significant for ship leasing as each rig drives a support spread of chartered ton - nage, notably Platform Supply Vessels (PSVs), Anchor Handling Tug Supply (AHTS) vessels, crew boats and barges for exploration, production and evacuation support. Additionally, according to the Equipment Leasing Association of Nigeria (ELAN) 2025 Outlook Report, the oil and gas sector held 25% of leases worth NGN1.1 trillion. The report also noted that oper - ating leases remain dominant in the oil and gas and its supporting maritime sectors. Overall, the surge in rig activity and oil and gas operations in Nigeria has translated into demand for leased vessels, as oil and gas operators seek cost-efficient and fit-for-purpose maritime assets to support their logistics. No published or industry-wide research tracks shifts in vessel financing patterns in Nigeria. However, the authors’ experience in the space suggests that tra - ditional bank lending continues to dominate vessel financing activity in the Nigerian market. Some growth has been observed in alternative credit arrangements, particularly shipyard/supplier credit financing and bareboat charter party with an obligation to purchase. Private equity participation and the use of Chinese leasing houses exist, but they are mainly de minimis. In Nigeria, there are no differences in the treatment/ enforcement of ship mortgages and lease defaults by courts or arbitral tribunals.
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