NIGERIA Law and Practice Contributed by: Tamuno Atekebo, Chinasa Unaegbunam, Naomi Kabowei and Favour Osayuwamen, Streamsowers & Köhn
3.2 Security 3.2.1 Typical Forms of Security and Recourse In a domestic aviation finance transaction, typical forms of security and recourse will include aircraft
3.2.7 Formalities/Mandatory Terms to Create and Perfect Security Assignments There are no unique formalities necessary for the crea - tion and perfection of a security assignment outside the recognised requirements for such agreements – for example, that the assignment must be in writing, clearly identify the collateral and state the intention to create a security interest. The security assignment must also be registered with the NCAA. Failure to comply with these formalities might render the secu - rity assignment unenforceable against third parties. Where such an agreement is to be tendered before a Nigerian court, it is necessary for it to be translat - ed (if in a language other than English) and certified/ notarised. 3.2.8 Domestic Law Security Instruments It is advisable to consider taking a domestic law secu - rity instrument to cover any additional requirements under Nigerian law, if an English or New York law- governed security assignment is taken in respect of an aircraft registered domestically in Nigeria. Domes - tic law security instruments and local law filings are required for Cape Town Convention filings. The cost for such filings varies and is set out in the schedule of fees and charges issued by the NCAA. 3.2.9 Domestic Registration of Security Assignments Governed by Foreign Laws An English or New York law-governed security assign - ment or a domestic law security instrument may be registered domestically. It is recommended to con - sider domestic registration to maximise the protection of the security interest in Nigeria where the aircraft is registered. 3.2.10 Transfer of Security Interests Over Aircraft/ Engines The transfer of security interests, including mortgag - es, charges and assignments over an aircraft and/or engines, is recognised under Nigerian law. 3.2.11 Effect of Changes in the Identity of Secured Parties The change in identity of secured parties under a security assignment does not usually jeopardise secu - rity interests if the assignment is properly documented and registered with the relevant authorities.
mortgages, charges and guarantees. 3.2.2 Types of Security Not Available
Due to their nature, it may be challenging or not fea - sible to take certain types of security over aircraft or related collateral, such as security solely on warranties and insurances. Although traditional forms of security often focus on tangible assets such as the aircraft itself, taking securities solely over warranties and insurances might be complex, owing to their intan - gible nature. 3.2.3 Trust/Trustee Concepts The concept of a trust and a security trustee role are recognised in Nigeria and are quite popular in struc - tured finance in Nigeria. A parallel debt structure can be used, creating separate obligations between bor - rower and lenders and achieving similar security out - comes. 3.2.4 Assignment of Rights to an Aircraft by a Borrower to a Security Trustee A borrower can assign to a security trustee its rights to the aircraft or under an aircraft lease (including rights related to insurances), pursuant to a security assign - ment or mortgage. This assignment allows the secu - rity trustee to hold and enforce those rights on behalf of the lender(s) in the event of default. 3.2.5 Assignment of Rights and Benefits Without Attendant Obligations A lessor may assign the rights and benefits only with - out also assigning the attendant obligations under an aircraft lease. This type of arrangement is known as an “assignment of rights” or ”assignment of benefits”. However, it is essential to ensure that the assignment does not conflict with the terms of the lease agree - ment and that any required consent is obtained from the relevant parties. 3.2.6 Choice of Foreign Law Security assignments or guarantees can be governed by English or New York law.
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