Key Considerations for Drafting Cross-Border Commercial Agreements in Nigeria
Target Audience: International businesses, multinational corporations, legal professionals, contract managers
Introduction
Foreign investors entering the Nigerian market frequently collaborate with local partners—distributors, agents, contractors, or joint-venture partners. These relationships present significant commercial opportunities, but only if the underlying contracts are airtight, compliant with Nigerian law, and drafted with enforcement in mind.
This article outlines the essential legal protections every overseas company should consider when contracting with Nigerian partners.
1. Structuring the Right Contract Type
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. |
Warning: 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
Recent Case Law: The Nigerian Court of Appeal in Sqimnga (Nig) Ltd v. SAP (Nig) Ltd reaffirmed the enforceability of foreign law and jurisdiction clauses in commercial contracts, confirming that Nigerian courts will generally uphold parties' contractual choices unless compelling reasons dictate otherwise.
3. Dispute-Resolution Framework (2025 Update)
The Arbitration and Mediation Act (AMA) 2023 modernised Nigeria's dispute-resolution 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 Arbitration Venues
Under the AMA 2023, courts must stay proceedings in favour of arbitration unless the agreement is void or inoperative. Split-jurisdiction clauses are formally supported.
- Lagos Court of Arbitration (LCA)
- Lagos Chamber of Commerce International Arbitration Centre (LACIAC)
- Chartered Institute of Arbitrators (UK) Nigeria Branch
4. Common Contract Pitfalls
| Pitfall | Earlier Assumption | Legal Reality & Fix |
|---|---|---|
| Agency / Distribution Registration | Register exclusivity at CAC | Review exclusivity under FCCPA for anti-competitive risk. |
| Stamp Duty Neglect | Unstamped contracts merely unenforceable | Now a tax liability. Under the NRS Act 2025 and recent case law (Oando Oil v FIRS, Nov 2025), unpaid duty on commercial contracts (e.g., SPAs) becomes a recoverable tax debt with 10% penalty and interest. |
5. Nigerian Law as Governing Law
When drafting contracts with Nigerian parties or for Nigerian operations, it is generally advisable to select Nigerian law as the governing law and Nigeria as the jurisdiction. This approach:
- Ensures enforceability in Nigerian courts
- Aligns with local regulatory requirements
- Reduces the risk of jurisdictional challenges
Note: Nigerian courts will generally uphold the parties' choice of foreign law and jurisdiction clauses, reinforcing the principle of party autonomy.
Conclusion
Cross-border contracting in Nigeria requires careful attention to legal structure, governing law, dispute resolution mechanisms, and compliance with evolving regulations. The AMA 2023 and recent case law provide a robust framework for enforcing commercial contracts, but proactive legal drafting remains essential.
At RG Castle Law Firm, we advise international and Nigerian clients on cross-border transactions, contract drafting, and dispute resolution, ensuring that commercial agreements are legally sound and commercially effective.
By Raphael Usuomon, Partner
Raphael Usuomon is a Partner at RG Castle Law Firm, Abuja, and Head of Strategy & Forensic Advisory. He holds a Master of Laws (LL.M) in Administrative and Legislative Studies and is currently pursuing a Doctorate. He is a Chartered Mediator (AICMC) and a certified Forensic Studies professional.
