NIGERIA Law and Practice Contributed by: Ben Unaegbunam, Omolola Coker, Sanford Mba, Promise Osimhen, Chidera Chikere and Oluwaseun Denagan, Dentons ACAS-Law (Adepetun, Caxton-Martins, Agbor & Segun)
Lenders frequently require asset-backed structures, receivables assignments, or subordinated positions, shaping both contract complexity and enforceability. Exposure to high-yield borrowers has prompted banks to adopt structured covenants, blended financing, and risk-adjusted portfolio strategies, influencing broader lending practices. Also, lenders are adapting by struc- turing their loans with call protection, prepayment fees, or step-up margins, in anticipation that borrow- ers may refinance through high-yield notes. High-yield facilities provide diversification opportu- nities for institutional lenders and encourage private capital participation, supporting liquidity and market development. 1.4 Alternative Credit Providers Nigeria’s loan market has grown with alternative credit providers such as fintech-driven digital lenders, peer- to-peer platforms, microfinance banks, leasing firms, and specialised finance companies. These players have expanded offerings like invoice discounting, supply chain finance, blended finance structures, and credit guarantees for SMEs. Most digital loans are short-term (30–180 days) with same-day disburse- ment, prompting banks to streamline small-ticket lend- ing. Commercial banks now partner with fintechs in co-lending and revenue-sharing models that combine bank funding with fintech origination. These innova- tions have widened credit access for retail borrowers and SMEs while pushing traditional banks to acceler- ate approvals, adjust pricing, and improve terms. 1.5 Banking and Finance Techniques Banking and finance techniques in Nigeria are adapt- ing to a more diverse investor base and shifting bor- rower needs. Large corporations and financial spon- sors increasingly employ holding-company (HoldCo) structures to centralise funding, ring-fence operating risks, and facilitate cross-border investments, particu- larly in power, infrastructure, and fintech conglomer- ates. Preferred equity and quasi-equity instruments are gaining traction as borrowers seek capital without immediate dilution and investors look for yield with downside protection. Private equity funds, develop-
ment finance institutions, and local pension funds are participating in structured preferred shares that carry dividend preferences, convertibility features, or par- ticipation rights similar to mezzanine debt. In parallel, lenders are embedding hybrid instruments, such as convertible debt, revenue-sharing notes, and subordinated debt that qualifies as regulatory capital, to strengthen balance sheets and appeal to investors seeking higher yield. 1.6 ESG/Sustainability-Linked Lending Nigeria has seen a sharp rise in ESG and sustainability- linked lending, driven by policy and private demand. The federal government’s NGN50 billion Series III Sov- ereign Green Bond (2025) and earlier issuances show growing labelled debt for renewable energy, clean transport, and water projects. Commercial lenders are following suit, for example Ecobank’s USD200 million sustainability-linked loan tied to climate targets. The Nigerian Exchange (NGX), with IFC support, is build- ing capacity for green, social, blue, and sustainability bonds. Banks like FCMB and FirstHoldCo now embed ESG criteria in lending and credit approvals. Activity is strongest in gender finance, renewables, clean infra- structure, water, waste, and green real estate. 2. Authorisation 2.1 Providing Financing to a Company In Nigeria, banks and non-bank financial institutions must obtain regulatory approval to provide financing to local companies. Banks are licensed and super- vised by the CBN under the Banks and Other Financial Institutions Act 2020 (BOFIA), with minimum paid-up capital requirements, prudential ratios, and govern- ance standards. Once licensed, banks may offer a full range of credit facilities, subject to ongoing CBN oversight. Non-bank financial institutions including finance com- panies, microfinance banks, leasing and factoring firms, and digital lenders are also required to secure CBN authorisation, with capital thresholds and licens- ing requirements tailored to their specific business models. Foreign lenders may provide cross-border
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