NIGERIA Law and Practice Contributed by: Tamuno Atekebo, Chinasa Unaegbunam, Naomi Kabowei and Favour Osayuwamen, Streamsowers & Köhn
3. Aircraft Debt Finance 3.1 Structuring 3.1.1 Restrictions on Lending and Borrowing Foreign lenders can provide financing and borrowers can use loan proceeds to purchase aircraft. 3.1.2 Effect of Exchange Controls or Government Consents There are no specific exchange controls or govern - ment consents that are peculiar to the aviation sec - tor, and applicable exchange controls or government consents on financing or repatriation of proceeds will apply to an aviation-related transaction. It should be noted that foreign investors are allowed to take out their earnings and investment-related funds without facing significant obstacles, according to the provi - sions of Section 24 of the Nigeria Investment Promo - tion Commission Act. 3.1.3 Granting of Security to Foreign Lenders Nigeria is a signatory to the Cape Town Convention, which allows for the creation of international interests in aircraft equipment, including granting security to foreign lenders. Thus, borrowers can use aircraft as collateral to secure loans from foreign lenders. 3.1.4 Downstream, Upstream and Cross-Stream Guarantees Downstream, upstream and cross-stream guarantees are permitted in favour of lenders in Nigeria. Although there is no specific registration requirement for guar - antees under Nigerian law, Section 197 of the CAMA does require the registration of charges, which may include guarantees. Failure to register a charge within 90 days of its creation may render it void against liq - uidators and creditors. 3.1.5 Lenders’ Share in Security Over Domestic SPVs A lender can take a share in security over a domestic special-purpose vehicle (SPV) that owns a financed aircraft. This involves using ownership shares of the SPV as collateral for the financing provided. A pledge of shares is a recognised method of security in Nigeria and its registration has been provided for under Sec - tion 197 of the CAMA.
3.1.6 Negative Pledges Negative pledges are recognised under Nigerian law and it is advisable for a lender to register the nega - tive pledge with the Corporate Affairs Commission to prevent future security interests that could undermine the existing security. 3.1.7 Intercreditor Arrangements There are no laws in Nigeria with any material restric - tions or requirements on inter-creditor arrangements. 3.1.8 Syndicated Loans The concept of agency and the role of an agent (facil - ity/syndicate agent) is recognised and utilised in syn - dicated loan arrangements in Nigeria. 3.1.9 Debt Subordination Contractual subordination among creditors is legally recognised in Nigeria, enabling the modification of priority orders, the waiver of rights or the subordina - tion of security interests. However, its enforceability in insolvency proceedings may be limited, owing to bankruptcy laws treating unsecured creditors equally and granting secured creditors the right to enforce their security even during liquidation. 3.1.10 Transfer/Assignment of Debts Under Foreign Laws The transfer or assignment of all or part of an out - standing debt under an English or New York law-gov - erned loan is generally permissible and recognised under Nigerian law. However, the terms of the loan agreement and any applicable legal requirements as to notice need to be considered. 3.1.11 Usury/Interest Limitation Laws Interest rate limits are typically governed by various laws and regulations, including Sections 15 and 16 of the Moneylenders Laws, the Central Bank of Nige - ria Act 2007, and other relevant financial regulations. These laws aim to protect borrowers from unfair lend - ing practices and ensure that interest rates remain reasonable.
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