NIGERIA Law and Practice Contributed by: Tamuno Atekebo, Chinasa Unaegbunam, Naomi Kabowei and Favour Osayuwamen, Streamsowers & Köhn
restrain the lessor from repossessing, but such appli - cations must be made with clear evidence that the aircraft is an asset of the lessee. The aircraft will not be deemed to be the lessee’s property. Nigerian courts recognise the rules of priority. The liq - uidator/administrator cannot impose the right of any other creditor in priority over the lessor’s right because the aircraft asset does not belong to the lessee and the lessee could not have validly created an interest in the aircraft. In addition, registration of the lease with the NCAA gives the lessor priority over the aircraft above any other interest holder. 2.9.6 Risks for a Lender if a Borrower, Guarantor or Security Provider Becomes Insolvent When a borrower or guarantor becomes insolvent, the main risks for a lender are potential loss or delays in recovering debts owed, and possible challenges to the validity of security arrangements. 2.9.7 Imposition of Moratoria in Connection With Insolvency Proceedings Generally, the rights of secured creditors are not stayed by the commencement of insolvency proceed - ings. However, the CAMA imposes various moratoria for different actions that may be taken at the initiation of or during administration proceedings or a scheme of arrangements. The moratorium period is six months for a scheme of arrangement, whereas an administra - tion moratorium imposed to restrict the institution of proceedings to enforce security over company proper - ties, repossess goods under hire purchase agreement, or exercise a landlord’s right to peaceful re-entry, has no fixed period and any action taken will be subject to the consent of the administrator. 2.9.8 Liquidation of Domestic Lessees Under Nigerian law, a domestic lessee can be liquidat - ed by the appointment of a liquidator, or placed under administration or receivership through the appoint - ment of an administrator or receiver respectively, in accordance with insolvency laws. The liquidator is appointed following an application made by a special resolution of the shareholders, or
an application made by the directors or creditors of the company. An administrator may be appointed by the courts, or out of court, by holders of a floating charge or by the company’s directors. 2.9.9 Ipso Facto Defaults Defaults such as insolvency and liquidation are rec - ognised as the basis for termination and reposses - sion of aircraft. A lessor or mortgagee need not show performance defaults to be entitled to repossession of a leased aircraft. 2.9.10 Impact of Domestic Lessees’ Winding-Up If a domestic lessee is wound up through court or administration proceedings, this can have the follow - ing impacts. • On the aircraft – the fate of the aircraft is largely dependent on the terms of the lease. The lessor’s rights will usually include the right to terminate and repossess the aircraft if the lessee is wound up and this right will be exercised by the lessor, resulting in possession reverting to the lessor. • On lease rentals – the lessee’s obligation to pay lease rentals ceases. Any due lease payments will form part of the lessee’s debt obligations. • On the lease security deposit – the impact on the lease security deposit will depend on the terms of the lease agreement. If the deposit is agreed as payment towards lease rentals, then the lessor is entitled to apply the deposit towards any pending rent liability of the lessee. • On the maintenance reserves – the treatment of maintenance reserves also depends on the lease agreement. If classified as reserves, they might be held in a separate account; if treated as sup - plemental rent, they could be affected similarly to lease rentals. 2.10 Cape Town Convention and Others 2.10.1 Conventions in Force Nigeria is a signatory to the Cape Town Convention and the Aircraft Protocol. By virtue of Section 50 (2) of the CAA 2022, the Cape Town Convention and the Aircraft Protocol are in force in Nigeria. It is not necessary to obtain authorised entry point (AEP) codes for registering international interests.
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