NIGERIA Trends and Developments Contributed by: Ozioma Agu, David Olajide and Onyinyechi Isikaku, Stren & Blan Partners
Insolvency and bankruptcy proceedings The Nigerian insolvency framework, primarily con- tained in CAMA, 2020, the Bankruptcy Act, Cap B2 LFN 2004 and the Insolvency Regulations 2022, also has a significant impact on ICAs. While the courts generally recognise intercreditor arrangements, they will enforce them within the boundaries of statutory insolvency law. Certain pre-liquidation transactions, such as preferences or transactions at undervalue, may be set aside under claw-back provisions. Further- more, the statutory hierarchy of claims gives priority to specific creditor classes, such as employees and tax authorities, which may override contractual arrange- ments in an ICA. Lenders must therefore structure their agreements with the recognition that Nigerian insolvency law can modify or displace negotiated pri- orities, particularly with respect to the treatment of secured creditors and the distribution of proceeds Although ICAs and security documents are binding under Nigerian law, enforcement is often hampered by the inefficiencies of the judicial system. Court pro- ceedings for debt recovery or enforcement of secu- rity can be prolonged, leading to significant delays in asset realisation and increased costs for lenders. Arbi- tration clauses may provide a faster avenue for resolv- ing disputes among lenders; however, the enforce- ment of security interests typically requires recourse to Nigerian courts. While out-of-court enforcement mechanisms, such as the appointment of receivers or managers under a debenture, are available, they are not immune to practical challenges. For this rea- son, ICAs should provide for robust dispute resolu- tion mechanisms while also recognising the realities of enforcement in Nigeria. Regulatory approvals and licensing Finally, regulatory approvals and licensing require- ments must be considered in structuring intercreditor arrangements. Lending activities are regulated by the CBN, and only licensed institutions are permitted to carry on such business in Nigeria. Foreign loans may also require approvals from the CBN. For instance, where a Nigerian company obtains a USD-denominat- ed syndicated loan from offshore lenders, the inflow of the loan must be registered with an Authorised Dealer during liquidation or administration. Judicial enforcement and delays
Bank to obtain a Certificate of Capital Importation (CCI). The CCI serves as evidence that the loan funds were duly imported into Nigeria and allows the bor- rower to access the official foreign exchange market for repayments of principal and interest. Without the CCI, the borrower may be unable to make repayments through official channels, and the lenders may be restricted in repatriating their funds. Moreover, where public sector borrowers are involved, registration with the Debt Management Office (DMO) is required. In sector-specific transactions, such as in the oil and gas industry, approvals from regulators like the Nige- rian Upstream Petroleum Regulatory Commission (NUPRC) may be required. Failure to obtain these approvals can invalidate the underlying transaction or render it unenforceable. Consequently, thorough due diligence is essential, and ICAs should clearly state any conditions precedent relating to regulatory approvals or licensing obligations. Conclusion In Nigeria’s complex and often challenging multi- lender financing landscape, ICA stands out not as a mere contractual formality but as a critical pillar for stability, clarity, and enforceability. Its careful struc- turing is essential to protect the interests of all stake- holders, lenders seeking to secure their investments and borrowers striving for operational continuity and predictable financial obligations. For lenders, a well- drafted ICA provides a structured framework for man- aging intercreditor relationships, clarifying payment and security priorities, and ensuring a co-ordinated enforcement strategy during financial distress. By reducing the risks of competing claims over the same assets, the ICA helps preserve value, streamlines recovery processes, and fosters confidence in syn- dicated or club financing structures. Key provisions such as payment and security subordination, stand- still arrangements, and clearly defined enforcement rights become particularly significant when adapted to the nuances of Nigerian law and practice. For borrowers, understanding the ICA is equally criti- cal. Its provisions directly influence cash flow man- agement under waterfall arrangements, covenant compliance, and the potential implications of enforce- ment actions. A proactive and informed approach to negotiating ICA terms helps borrowers anticipate
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