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)
8.3 Governing Law There is no statutory requirement in Nigeria that pro- ject finance documents must be governed by Nige- rian law. Please see 6.2 Foreign Law and Jurisdiction regarding party autonomy as to the choice of govern- ing law. Financing agreements usually adopt foreign law, especially where international lenders or multilat- erals are involved. On the other hand, where there is a security over a Nigerian asset, the practice is to have the security documents governed by Nigerian law for certainty and ease of enforcement. Similarly, Nigerian courts will ordinarily respect a con- tractual submission to a foreign jurisdiction, including clauses specifying that disputes should be resolved by foreign courts or arbitral tribunals. See 6.2 Foreign Law and Jurisdiction regarding party autonomy as to submission to jurisdiction. Foreign judgments and arbitral awards are enforce- able in Nigeria upon satisfaction of specified condi- tions. See 6.3 Foreign Court Judgments regarding the enforcement of foreign judgments and arbitral awards. Nigeria has also ratified and domesticated the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958). 8.4 Foreign Ownership In Nigeria, foreign ownership of land and related real property faces significant restrictions under the Land Use regime, which vests all land in each state’s gover- nor to hold in trust for Nigerians. Most states maintain their own regulation of alien acquisition. Even where land rights are validly obtained, further authorisation is required for later transfers, alienations, or enforce- ment actions that would vest title in another foreigner. In Heubner v A.Ie, & P.M. Co. Ltd. (2017), the court confirmed that foreigners lack the legal capacity to hold a right of occupancy without the governor’s con- sent, whether directly or through a nominee company. Likewise, mortgaged property cannot be enforced and sold to a foreign purchaser without securing the gov- ernor’s approval. Foreign lenders may take security interests over Nige- rian assets but must accommodate these restrictions when structuring project financings. In practice, spon-
sors often rely on Nigerian-incorporated project com- panies or beneficial ownerships such as trusteeship. 8.5 Structuring Deals Project finance transactions in Nigeria are typically structured through a special purpose vehicle typi- cally incorporated as a limited liability company, to ring-fence project risk. Generally, unless an exemp- tion is granted under the conditions set out in CAMA, foreign companies cannot carry on business without local incorporation; thus, they must establish a Nige- rian subsidiary. There is no restriction on 100% foreign ownership in most sectors; however, sensitive areas such as oil and gas and aviation have some level of local content compliance requirements. A project company with foreign participation is required to have a minimum NGN100 million share capital. In addition, foreign investors must register their equity with the Nigerian Investment Promotion Commission (NIPC) to benefit from guarantees of cap- ital repatriation and protection against expropriation. Such project company must also obtain a certificate of capital importation (CCI) from an authorised dealer bank, which is essential to remit dividends, repay off- shore loans, and repatriate capital on exit. The CBN recently prohibited the practice of using foreign currency-denominated collateral for Naira loans except where the foreign currency collateral is Eurobonds issued by the federal government of Nige- ria or guarantees of foreign banks, including standby letters of credit. 8.6 Common Financing Sources and Typical Structures With the aid of special-purpose vehicles, project financing is typically structured as limited-recourse or non-recourse financings. This traditional funding is led by commercial bank debt, development financial institutions, multilateral agencies and other capital providers. • Bank Financing: Domestic and international banks remain the primary source of debt financing. Nige- rian banks frequently participate in project loans, often in syndicates to manage exposure limits. International banks also provide foreign currency.
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