Cross-Border Contracting in Nigeria: Legal Protections for Foreign Companies
Foreign investors entering the Nigerian market frequently collaborate with local partners, making cross-border contracting in Nigeria a critical risk and value consideration.
Foreign investors entering the Nigerian market frequently collaborate with local distributors, agents, contractors, or joint-venture partners. These relationships present major commercial opportunities, but only if the underlying contracts are airtight, compliant with Nigerian law, and drafted with enforcement in mind.
This guide outlines the essential legal protections every overseas company should include when contracting with Nigerian partners.
1 · Structuring the Right Contract Type in Nigeria
Choosing the correct contract form determines ownership exposure, tax treatment, and enforceability.
| Contract Type | Typical Use Case | Key Legal Considerations (2025) |
|---|---|---|
| Distribution / Agency Agreement | Local sale or distribution of imported goods | No CAC registration required. Review exclusivity clauses for antitrust compliance under the Federal Competition and Consumer Protection Act (FCCPA). |
| Service / Consultancy Agreement | Technical, advisory, or management services | Define scope, deliverables, IP ownership, and Withholding-Tax allocation (5 – 10 %). |
| Joint Venture (JV) Agreement | Shared equity or project participation | Register the JV entity with CAC and NIPC to secure foreign-capital recognition and incentive eligibility. |
| Supply / Construction Contract | Large procurement / EPC projects | Confirm performance-bond requirements, governing-law clause, and dispute-resolution provisions. |
Misclassifying a distributorship or agency as a “partnership” can create unintended joint liability under CAMA 2020.
2 · Governing Law and Jurisdiction
Foreign parties often prefer their home-country law, but Nigerian courts may decline to enforce foreign-law clauses where contracts are substantially performed in Nigeria.
Best-Practice Framework (2025)
- Governing Law: Use Nigerian law for locally executed or performed contracts to ensure enforceability.
- Jurisdiction Options:
- Nigerian Courts – appropriate for routine contractual disputes.
- Arbitration – preferred for neutrality and speed.
- Split Clauses – now expressly permitted: arbitration for substantive issues, Nigerian courts for interim relief.
Under the Arbitration and Mediation Act 2023, courts must stay proceedings in favour of arbitration unless the agreement is void or inoperative. Split-jurisdiction clauses are formally supported.
3 · Dispute-Resolution Framework (2025 Update)
The Arbitration and Mediation Act 2023 modernised Nigeria’s regime, aligning it with the UNCITRAL Model Law and global best practice.
Key Innovations
- Award Review Tribunal (ART): Parties may agree to an internal tribunal to review an arbitral award before any court challenge—minimising delay.
- Emergency Arbitrators: Authorised to grant urgent interim measures.
- Electronic Arbitration: Digitally conducted proceedings and awards are enforceable.
- Mediation Settlement Awards: Court-enforceable once executed.
- Enforcement: Domestic and foreign awards are enforceable under Section 57 AMA 2023 and the New York Convention 1958.
Leading Venues: Lagos Court of Arbitration (LCA) | Lagos Chamber of Commerce International Arbitration Centre (LACIAC) | Chartered Institute of Arbitrators (UK) Nigeria Branch
The ART mechanism and mandatory court-stay provision make Nigeria’s arbitration system one of the most efficient and enforceable in Africa.
4 · Common Contract Pitfalls
| Pitfall | Earlier Assumption | Legal Reality & Fix |
|---|---|---|
| Agency / Distribution Registration | Register exclusivity at CAC [https://www.cac.gov.ng] | Review exclusivity under FCCPA for anti-competitive risk. |
| Stamp Duty Neglect | Unstamped contracts merely unenforceable | Now a tax liability. Under NRS Act 2025 and TAT (Oando Oil v FIRS, Nov 2025), unpaid duty on commercial contracts (e.g., SPAs) becomes a recoverable tax debt + 10 % penalty + interest. |
| No WHT Clause | Neutral | Causes double deduction / tax disputes. State which party remits and at what rate. |
| Late NOTAP Registration | Minor administrative delay | Must file within 30 days for FX-related tech-transfer / royalty contracts. Late filing attracts ₦100 000 + penalty and blocks CBN FX approval. |
| Ambiguous Termination | Courts flexible | Draft objective termination triggers + clear notice procedures. |
5 · Risk-Mitigation Clauses Every Foreign Investor Should Include
- Force Majeure: Cover political, regulatory, and foreign-exchange risks.
- Change-in-Law: Permit contract adjustment if tax or customs law changes mid-term.
- Currency of Payment: Specify currency (USD / NGN equivalent) and reference the CBN Investors’ & Exporters’ (I&E) Window rate.
- Compliance Clause: Mandate adherence to Nigerian anti-bribery, AML, and NDPR 2019 data-protection rules.
- Dispute-Escalation Ladder: Negotiation → Mediation → Arbitration → ART Review → Enforcement.
Contracts involving royalties, technical services, or management fees must be registered with NOTAP within 30 days of execution. Failure does not void the contract, but the CBN cannot authorise foreign-exchange payments until registration is completed.
6 · The Advantage
HighLaw Chambers advises international and multinational clients on:
- Localising cross-border and technology-transfer contracts.
- Drafting arbitration clauses that comply with the Arbitration and Mediation Act 2023 (including ART provisions).
- Handling CBN, NIPC, and NOTAP registrations.
- Representing clients before Nigerian courts and arbitral tribunals.
Next in the Series
(If you missed earlier articles, read “Employment Law Essentials in Nigeria for Foreign Companies Hiring Local Talent.”)
