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)
Market participants may adopt alternative structures to achieve similar outcomes. For instance, collater- al-agent arrangements designate a bank or finan- cial institution to hold security on behalf of multiple lenders, effectively replicating a trustee’s role without establishing a formal trust. Intercreditor agreements co-ordinate lender rights and priorities with respect to collateral enforcement, while special-purpose vehi- cles (SPVs) are used in structured finance or project finance transactions to hold assets and manage cash flows. 3.6 Loan Transfer Mechanisms The Nigerian legal framework recognises several mechanisms for the transfer of loans and the corre- sponding rights over associated security packages, providing flexibility in syndicated lending, secondary loan markets, and structured finance transactions. Assignment of loans is the primary mechanism by which a lender may transfer its rights under a loan agreement, including the right to receive repayments and enforce collateral, to another party. Assignments may be absolute or partial, and borrower consent is generally required if stipulated in the loan agreement. Security interests, ranging from mortgages to fixed and floating charges, share pledges, and guarantees can also be assigned, either directly or via a security trustee or collateral agent acting on behalf of multiple assignees. Novation offers an alternative whereby the original lender is replaced by a new lender, transferring both rights and obligations under the loan agreement. Nova- tion extinguishes the original contractual relationship and creates a new agreement between the borrower and incoming lender. This mechanism is particularly relevant in syndicated loans or debt restructurings, allowing both the loan and the associated security to be effectively transferred with minimal disruption to the borrower’s obligations. 3.7 Debt Buyback There is no statutory or regulatory prohibition on loan buybacks in Nigeria. Accordingly, a borrower or its sponsor may repurchase outstanding debt, provided that any contractual restrictions in the facility agree- ment, such as negative covenants, prepayment pre-
miums, or lender-consent requirements, are complied with. 3.8 Public Acquisition Finance Nigerian law does not explicitly mandate “certain funds” provisions in acquisition finance transactions, However, market practice, particularly for transactions involving listed companies or regulated sectors, has developed contractual protections to ensure funding certainty at signing. In such deals, lenders are general- ly required to confirm the availability of funds at com- pletion, often through commitment letters or funding confirmations delivered to the target, its advisers, or SEC as part of the regulatory approval process. Regarding public filing, long-form acquisition agree- ments are generally submitted to the SEC in trans- actions requiring regulatory approval, whereas short- form documentation is typically retained for internal or lender due diligence purposes and is not filed with public registries. There is no reported Nigerian case law directly addressing “certain funds” obligations in public acquisitions. 3.9 Recent Legal and Commercial Developments Recent legal and commercial shifts in Nigeria have driven updates to loan structuring and documentation for compliance, enforceability, and global alignment. For instance, the CBN now imposes stricter rules on foreign-currency collateral for naira loans, cash pool- ing, and repatriation, requiring tailored provisions on timing, access, and approvals. CAMA amendments reinforce fiduciary duties and corporate-benefit tests for guarantees and intercompany loans, prompting revised representations and warranties. 3.10 Usury Laws Nigeria does not have traditional usury laws that set explicit statutory caps on interest rates for commer- cial loans. Instead, interest rates are largely market- determined and influenced by CBN’s monetary policy instruments, such as the Monetary Policy Rate (MPR) and the Cash Reserve Ratio (CRR). While corporate and institutional borrowers typically negotiate rates freely, legal and regulatory frameworks provide constraints to ensure fairness. The CBN Pru-
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