NIGERIA Trends and Developments Contributed by: Tosin Ajose, Izuchukwu Ubadinma, Deborah Leshi and Precious Omope, DealHQ Partners
monetary policy rate is at an all-time high, resulting in a ballooning domestic cost of debt. Consequently, investors are increasingly favouring equity capital and blended financing against conventional debt for core energy and infrastructure projects. Foreign exchange (FX) and macroeconomic volatility continue to shape deal pricing and deal structure, with counterparties demanding stronger currency protection and more Liquidity tightness continues to pervade energy and infrastructure projects, especially for longer tenured projects with heavy capex and embedded FX risk. Cost of capital has risen globally; DFIs have tightened underwriting standards, demanding clearer hedging strategies and off-take guarantee. Domestic debts are incurring the highest ever interest rates, with shorter, mismatched tenors. As a result, sourcing long-term patient capital therefore positions DFIs and export credit agencies as critical funding counterparties. However, in view of growing demand, these funding sources have become increasingly competitive, with funding constrained by size, capital cycles and policy alignment. Infrastructure supply chain gaps Infrastructure supply chain in Nigeria remains frag- mented, with miniscule and fragmented local manu- facturing capacity resulting in high import dependency for critical plant, equipment, spare parts and other components, exposing projects to FX volatility. Slow and unpredictable custom clearance processes also impair supply chain efficiency and sometimes result in time and cost overruns. To moderate the impact of these gaps, it is hoped there will be more government intervention with respect to Value Added Tax (VAT) and import duty exemption for critical inputs whilst unlock- ing capacity for domestic equipment manufacture and assembly. Political risk and regulatory uncertainty robust revenue and cost hedges. Liquidity and funding constraints Recent reforms have brought relative stability to ener- gy and infrastructure M&A. The PIA introduced clearer fiscal frameworks, enhanced governance standards and incentives for gas development and local con- tent. Similarly, the Electricity Act 2023 decentralised the power market by empowering states to license
generation and distribution activities, creating clearer entry routes for mini-grid, embedded generation and renewable projects. However, regulatory gaps and practical uncertainties persist. Delays in implementing host community trust obligations and licence conversion processes under the PIA continue to affect asset valuations and deal timing. In the power sector, the shift to sub-nation- al regulation has introduced overlapping oversight between the NERC and state regulators, creating risks of dual approvals. In addition, power tariff-set- ting remains politically sensitive, certainly affecting revenue for power assets. Antitrust and competition considerations With heightened interest in platform acquisitions, it is imperative to ensure compliance with applicable competition laws. Interconnected SPVs or companies will need to pay specific attention to transfer pricing, cross subsidies, taxation, shared governance and other competition-related risks. In addition, platforms acquisitions often face more rigorous merger clear- ance processes, which may delay transaction time- lines. Law, policies and regulatory developments The energy infrastructure and M&A regulatory land- scape has witnessed consistent regulatory reforms aimed at improving market efficiency, enhancing governance across the sector and creating a more structured, transparent and investor-friendly environ- ment. The understanding of these laws and policies by investors, project sponsors, acquirers or targets is critical to shaping project planning, transaction struc- turing, regulatory approvals and long-term operational sustainability. The key laws, policies and regulation reforms shap- ing energy infrastructure and M&A activities in Nigeria include the following. Upstream Petroleum Operations (Cost Efficiency Incentives) Order 2025 This executive order introduces a performance-based tax incentive to address the high cost of operations in the upstream sector. Under this framework, operators who reduce their Unit Operating Costs below annual
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