NIGERIA Trends and Developments Contributed by: Ozioma Agu, David Olajide and Onyinyechi Isikaku, Stren & Blan Partners
and obligations of each creditor class. These provi- sions are not boilerplate. Their careful negotiation and drafting are essential to creating a functional and enforceable framework for multi-lender transactions in Nigeria. In practice, these clauses determine how risks are allocated, how enforcement is co-ordinated, and how creditors’ interests are protected in times of distress. Risk allocation is the foundation of every multi-lender arrangement. Without clear provisions, creditors may pursue competing interests that destabilise the bor- rower and reduce recoverable value. In Nigeria, effec- tive ICAs achieve a balance between senior and junior creditors through a combination of contractual tools. Payment subordination An ICA establishes the order in which different classes of debt are repaid. In Nigeria, senior debt typically takes priority over mezzanine and subordinated debt. This means junior creditors agree not to receive pay- ments, whether principal, interest, or fees, until senior creditors have been paid in full or certain conditions are met. The clause clearly defines what constitutes a “payment” and the events that trigger subordination. For junior lenders, understanding the precise triggers for payment blockages and the conditions for their resumption is critical. For senior lenders, this provides certainty of repayment priority, especially in distressed scenarios. Security subordination and priority This clause governs the order in which creditors may access and realise value from shared collateral. While Nigerian law, under the Companies and Allied Matters Act 2020, generally prioritises earlier-created secu- rity interests, an ICA can contractually rearrange this priority. This becomes particularly relevant when multiple lenders share security over the same assets. The ICA specifies which security ranks senior, which is subor- dinated, and how proceeds from enforcement will be distributed. It also addresses key practical elements such as: • rights of senior versus junior creditors in enforce- ment;
• collateral definitions and perfection requirements (eg, registration at the Corporate Affairs Commis- sion or the National Collateral Registry for movable assets); and • procedures for releasing security. Standstill provisions Standstill provisions prevent junior creditors from taking enforcement actions for a defined period after default. This allows senior creditors time to devise and implement a recovery or restructuring strategy. These provisions are critical in maintaining order dur- ing distress, as premature actions by junior creditors can destabilise borrowers and erode asset value. Typi- cally, the standstill period ranges between 90 and 180 days. For junior creditors, negotiating exceptions and termination triggers is vital to ensure balance. Enforcement rights and control The ICA sets out which creditor group may initiate and control enforcement following a borrower’s default. Senior lenders typically retain primary control, includ- ing appointing receivers or administrators and selling secured assets.
The agreement details: • notice requirements; • consultation obligations; and • distribution of enforcement proceeds.
In some cases, junior lenders may gain enforcement rights if senior lenders fail to act within a set timeframe or if their exposure has been fully repaid. This balance ensures responsiveness without undermining senior control. Information covenants Access to timely information is vital in multi-lender transactions. ICAs typically require borrowers to pro- vide financial and operational data either directly to all lenders or via the security trustee. This ensures junior lenders – who may not otherwise have the same level of access as senior creditors – are ade- quately informed to monitor borrower performance and assess risks. Transparency across the creditor
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