General PPP framework


How has the concept of public-private partnership (PPP) developed in your jurisdiction? What types of transactions are permitted and commonly used in your jurisdiction?

The concept of PPP developed gradually in Nigeria and became prevalent towards the end of the 1990s. This has been linked to the end of military rule and the incoming civilian government’s need to make substantial investments to close the infrastructure gap owing to years of neglect. From 1999, the private sector started engaging in a more systematic manner with the government. Some examples of this are the MMA2 Airport and Apapa Ports concessions. This is also attributed to the Public Enterprises (Privatisation and Commercialisation) Act, which was also passed in 1999. The Act establishes the National Council on Privatisation and the Bureau of Public Enterprises (BPE) as the supervisory and implementing agencies respectively for privatisation and commercialisation transactions. A broad look at privatisation shows that it involves all forms of PPP because measures are adopted for the transfer of certain economic activities from the public sector to the private sector. However, the Privatisation and Commercialisation Act only applies to the full or partial privatisation and commercialisation of the list of public enterprises set out in it and not to any PPP transaction that is primarily ‘greenfield’.

The Infrastructure Concession Regulatory Commission Act (ICRCA) was enacted in 2005 and the Infrastructure Concession Regulatory Commission (ICRC) was established in 2008 as the agency charged with supporting the federal government’s drive towards the PPP model to fund much-needed infrastructural projects, including those that are greenfield.

There is no statutory definition for PPPs in Nigeria. However, the explanatory memorandum to the ICRCA states that the act provides for the participation of the private sector in financing the construction, development, operation, or maintenance of infrastructure or development projects of the federal government through concession or contractual arrangements.

Common types of PPP transactions in Nigeria are service contracts, management contracts, concessions and leases.

The build-operate-transfer variations are also commonly used in Nigeria, including design-build-finance-transfer, build-operate-own, and design-build-finance-operate models.

Covered categories

What categories of public infrastructure are subject to PPP transactions in your jurisdiction?

The federal government’s PPP programme embraces the creation of new infrastructure, and the expansion as well as the refurbishment of existing assets. Therefore, any category of public infrastructure that may benefit from a PPP can be subject to one. Some of these categories are, among others:

  • power generation plants and transmission or distribution networks;
  • roads and bridges;
  • seaports;
  • airports;
  • railways;
  • inland container depots and logistics hubs;
  • gas and petroleum infrastructure, such as storage depots and distribution pipelines, etc;
  • water supply, treatment and distribution systems;
  • solid waste management;
  • educational facilities;
  • urban transport systems;
  • housing; and
  • healthcare facilities.

Legislative framework

Is there a legislative framework for PPPs in your jurisdiction, or are PPPs undertaken pursuant to general government powers as one-off transactions?

There is a legislative framework for PPPs in Nigeria. The ICRCA is the primary legislation governing PPPs in Nigeria. The ICRCA provides the legislative basis for the procedures set out in the National Policy for PPP.

Other relevant legislation that governs PPPs include the Privatisation and Commercialisation Act 1999, which provides the legal framework for Nigeria’s privatisation and commercialisation programme; the Public Procurement Act 2007, which established the Bureau of Public Procurement (BPP) as the regulatory authority responsible for monitoring and oversight of public procurement, harmonising the existing government policies and practices by regulating, setting standards, and developing the legal framework and professional capacity for public procurement in Nigeria. The BPP issued regulations in 2007 known as the Public Procurement (Goods and Works) Regulations 2007, which set out procedures for public procurement generally, and have a provision for certain types of public procurement that are typically found in PPP arrangements (such as build-operate-own, build-operate-transfer, build-own-operate-transfer, etc). Although these Regulations suggest an overlap between the roles of the ICRC and BPP in the PPP procurement process, in practice BPP has remained neutral from the PPP procurement process (except for the procurement of transaction advisers by Ministries, Departments and Agencies (MDAs), which is carried out within the framework of the PPA), and it refers any PPP proposals it receives from MDAs to the ICRC. The Fiscal Responsibility Act 2007, which provides rules to ensure the accountability, transparency and prudence of government in the preparation of budgets and expenditure frameworks; and the Debt Management Office Act 2003, which governs all federal government loans, borrowings, guarantees and other long-term contingent liabilities.

Some state governments have also enacted their own PPP legislation. Examples include the Lagos State Public Private Partnership Law 2011 and the Rivers State Public-Private Participation in Infrastructure Development Law 2009.

There are also sector-specific laws and agencies that regulate different services. Examples of these include:

  • the Electric Power Sector Reforms Act 2005, which provides the statutory framework for participation of private companies in electricity generation, transmission and distribution, and establishes the Nigerian Electricity Regulatory Commission, to regulate activities in the electricity sector;
  • the Federal Highways Act Cap F13 LFN 2004, which empowers the Minister of Transport to construct federal highways as well as operate toll gates and collect tolls on the federal highways; and
  • the Utilities Charges Commission Act 1992, which regulates tariffs charged by public utilities in Nigeria.

Relevant authority

Is there a centralised PPP authority or may each agency carry out its own programme?

The ICRCA permits any federal government ministry, agency, corporation or body involved in infrastructure development and financing to enter into contracts with private sector proponents for the development, financing and operation of infrastructure. The ICRC provides the regulatory and institutional framework for MDAs to, in effect, partner with the private sector for infrastructure projects as provided for in the ICRCA. However, only federal bodies undertaking federal projects fall under the scope of the ICRCA. State government bodies and state infrastructure projects are not regulated by the ICRC.

The BPE is also responsible for implementing the full or partial privatisation and commercialisation of the list of public enterprises set out in the Privatisation and Commercialisation Act 1999.

In practice, the two regulatory agencies, the ICRC and BPE, collaborate when assets mentioned in the Privatisation and Commercialisation Act are to be developed as PPPs. The process will usually involve the relevant MDA under the coordination of the ICRC and the procedural advice of the BPE. The BPE has driven the privatisation process (wholly and partially) of many state-owned enterprises in Nigeria since its establishment in 1999, and it holds the public assets in trust for the Ministry of Finance until they are successfully sold or commercialised.


Are PPPs procured only at the national level or may state, municipal or other subdivision government bodies enter into PPPs?

PPPs can be procured at both national and state levels. However, the ICRCA does not apply to infrastructure projects undertaken by state governments where no federal asset or ministry is involved. States may develop their own frameworks for PPPs, and a number have made great progress in this regard. For example, Lagos state enacted its Public Partnership Law in 2011. Although each state is responsible for its own investment projects, its projects may be financed with the support of a guarantee by the federal government, considering the fact that various agencies of the World Bank work through the federal government (ie, provision of sub-sovereign guarantees to Nigerian states).


How is the private party in a PPP remunerated in your jurisdiction?

In Nigeria, remuneration of the private party in a PPP transaction depends on the terms of the contract. PPPs can be structured in such a manner that the private party is paid directly from user fees, which is the payment mechanism often used in PPP road projects such as toll roads. The private party may also be paid directly from the government authority either in the form of availability payments (the government pays when services above the specified quality standards are delivered by the private party), minimum revenue guarantees (where the government compensates the private party if the actual revenues from the users fall short of the guaranteed amount) or subsidised payments.

Sharing revenue and usage risk

May revenue risk or usage risk be shared between the private party and the government? How is risk shared?

The underlying principle in Nigerian PPP transactions is that risks are allocated to the party best able to manage them. Revenue risks may be transferred to the private party when the costs of the service are being transferred to the end users. This has the benefit of acting as an incentive for the private party to increase the quality of the service. The government may also choose to share the risk either by providing direct subsidies to costs or by providing guarantees. If revenue risk is not transferred, the task of collecting user charges and passing the revenues on to the authority may be given to the private-sector operator, provided there are robust audit arrangements in place to prevent fraud.

Risks related to macroeconomic instability (eg, inflation) and land acquisition are allocated to the government while the private party usually retains the risk of proper design and construction of the assets and the adequacy of financial returns to repay any loans. Inflation risks may be shared by indexing prices or passing them on to the end users where the sector has an independent regulator that has the power to set tariffs.

However, there are some risks that neither party can manage. These risks will usually be passed on to the government (eg, risks arising from force majeure). A mitigating option for these kinds of risks is a requirement that the private party take out insurance cover against them.

Government payment obligations

In situations where the private party is compensated in whole or in part through availability or other periodic payments from the government, are the payment obligations of the government subject to the relevant legislative body approving budgetary funding in the future?

Yes. The government’s payment obligations still need to be integrated into the government’s budgetary and financial strategy. However, the government will put in place measures through the Office of the Accountant General of the Federation (AGF) to ensure that funding for the government’s payment obligations are safeguarded to ensure prompt payment, subject to authorisation. If the financial standing of the government agency is not clear then special arrangements, like an escrow account, may be put in place.

Rate of return caps

Is there any cap on the rate of return that may be earned by the private party in the PPP transaction?

No. The rate of return of the private party is subject to the contractual agreement between the parties. Furthermore, section 7(1) of the ICRCA provides that a private party who enters into any contract for financing, construction, operation or maintenance may recover his or her investment subject to the provisions of the concession contract. However, the law goes further to mandate that the private party has the responsibility to undertake the appropriate insurance policy on the concession with an insurance company approved by the National Insurance Commission to undertake the maintenance and repairs of the infrastructure or facility for the duration of the contract.

Restriction of ownership transfer

Is the transfer of direct or indirect ownership interests in the project company or other participants restricted?

The transfer of interest in the project company may be restricted under the provisions of section 4(3) of the ICRCA. The section provides that if a bid is made for a project by a consortium, the consortium must prove that all its members are bound jointly and severally under the contract. Therefore, the withdrawal of any consortium member before or during the implementation of the contract may be a ground for review or possible cancellation of the contract. This is based on the fact that PPP contracts are usually granted based on the skills and competence of the private party. A transfer of the private party’s interest may be a violation of the basis for the contract being awarded.

Procurement process

Relevant procedure

What procedures normally apply to a PPP procurement? What evaluation criteria are used to award a PPP transaction?

The procedure generally used for PPP procurement is the competitive bidding procedure. Section 24(1) of the Public Procurement Act 2007 and section 4 of the Infrastructure Concession Regulatory Commission Act endorses competitive public bidding as the procurement procedure of choice. Section 4(2) of the ICRCA goes further to state that the concession contract will be granted to the bidder who has satisfied the pre-qualification criteria and submits the most technically and economically comprehensive bid. Competitive bidding is a two-stage bidding process which includes:

Pre-qualification stage

  • publication of the request for quotation document;
  • submission of query by the perspective bidders;
  • pre-bid meeting;
  • authority response to queries;
  • application submission due date;
  • opening of technical proposal;
  • technical capability evaluation and report; and
  • acceptance of technical evaluation report by the procurement committee.

Bid stage

  • sale of bid and request for quotation document to short-listed applicants;
  • submission of query by the perspective applicants;
  • pre-bid meeting;
  • authority response to queries;
  • bid submission due date;
  • opening of bids;
  • letter of intent; and
  • contract signing.

The evaluation criteria used to award a PPP transaction may either be on a least cost approach or on a quality cum cost-based selection.

The national PPP policy states that the procurement process is devised to allow bidders to maximise value for money in their bids, within constraints of transparency and fairness, rather than just achieving the lowest cost.

However, section 5 of the ICRCA waives the requirement of competitive bidding if after advertisement only one contractor submits a bid or if only one contractor meets the pre-qualification requirements. Also, the Public Procurement Act 2007 permits exemption from competitive bidding when there is an urgent need for the goods, works or services because of unforeseeable circumstances or as a result of a catastrophic event. However, the procuring government authority is required to justify its decision.

Consideration of deviating proposals

May the government consider proposals to deviate from the scope or technical characteristics of the work included in the procurement documentation during the procurement process, without altering such terms with respect to other proponents? How are such deviations assessed?

Yes. The government may consider proposals from the private party to deviate from the scope or technical characteristics of the PPP contract. Most PPP contracts specify conditions in which modifications are allowed and what the adjustment process will be. Although the private party’s technical schedule is binding on it, the output specification of government takes precedence. Therefore, if either party becomes aware that the contractor’s design, method statements or specifications will not meet the output specifications, these will be changed at the contractors’ cost until they comply with the output specifications. The private party will have to submit a proposal to the government stating the details of the proposed change, the likely impact on service delivery and the PPP contract. The government will decide whether to accept the proposal. If the proposal is accepted, the government will decide how the payment regime will be modified in line with the proposed change.

Unsolicited proposals

May government parties consider unsolicited proposals for PPP transactions? How are these evaluated?

Yes. Government parties may consider unsolicited proposals for PPP transactions. The ICRC published its guidelines for implementing unsolicited proposals for PPPs in Nigeria. An unsolicited proposal is evaluated as follows:

  • the unsolicited proposal is submitted to the relevant government authority for preliminary review. The authority checks to ensure that:
  • the proposal is up to outline business case standard;
  • the proposal serves the public interest;
  • the proposal is viable;
  • the proposed project can be classified as critical infrastructure; and
  • the project proponent has the competence to implement the project;
  • the proposal is then forwarded to the ICRC for review and the issuance of ‘no objection’ (if approved). Proposals submitted to the ICRC attract a service fee, which is a percentage of the project value;
  • technical and financial due diligence is conducted to ascertain the capacity of the proponent to implement the project if awarded;
  • ministerial approval is awarded;
  • the project proponent is issued with formal acknowledgement as project author;
  • competitive bidding commences;
  • if the project proponent is not successful at competitive bidding, it will be given a chance to submit a best and final offer, along with the preferred bidder; and
  • the successful bidder is finally chosen, based on the most economically and financially viable submission.

Government stipend

Does the government party provide a stipend for unsuccessful short-listed proponents or otherwise bear a portion of their costs?

Not in all cases. The government authority may decide, in its discretion, to reimburse the project proponent of an unsolicited proposal for its project development costs. However, this is purely at the discretion of the government authority.

Financing commitments

Does the government party require that proposals include financing commitments for the PPP transaction? If it does not, are there any mechanisms during the procurement process to ensure that the applicable PPP transaction, once awarded, is financeable?

The financial proposal is one of the bases for selecting the preferred bidder. The government carries out due diligence on the credibility of the preferred bidder’s proposed financing to be confident that the bidders can reach financial closure. In fact, the preferred bidder’s financial proposal is incorporated into the concession contract. One of the conditions precedent to the signing of the concession contract is the provision of performance security by the preferred bidder.

Legal opinion

May the government ask its counsel to provide a legal opinion on the enforceability of the PPP agreement? May it provide representations as to the enforceability of the PPP agreement?

Yes. The government may ask its counsel to provide legal opinion on the enforceability of a PPP agreement because the government requires legal due process to be followed for any form of procurement and enforceability of PPP agreement involving the government.

The government may also provide representations as to the enforceability of the PPP agreement. This may take the form of a warranty clause stating that its obligations under the PPP agreement are valid, binding and enforceable. The PPP agreement may also contain a clause of waiver of sovereign immunity whereby the government authority waives any right of immunity, which it or any of its assets may have in proceedings arising from the agreement.

Restrictions on foreign entities

Are there restrictions on participation in PPP projects by foreign entities? May foreign entities exercise control over the project company?

Foreign entities are allowed to participate in PPP projects. However, they must comply with the provisions of the Nigerian Investment Promotion Act and the Companies and Allied Matters Act, which require that foreign companies must incorporate local subsidiaries or branches to be eligible to do business in Nigeria. Foreign companies can exercise control over the project company as 100 per cent foreign ownership of a Nigerian business is permitted under the law. The exception to this is within the oil and gas sector, where the Nigerian Local Content Act 2010, which seeks to promote local participation in the industry, applies. In practice, foreign companies will often partner with local companies to provide the wide range of services required in a PPP project.

Design and construction in greenfield PPP projects

Form of contract

Does local law mandate that any particular form of contract govern design and construction activities? Does it mandate the choice of governing law?

No. The local law does not mandate any particular form of contract to govern design and construction activities. Parties to design and construction activities contracts in Nigeria usually negotiate their contracts on the basis of a draft prepared by their legal advisers. There are, however, common contract forms used for local construction projects, which include:

  • the Standard Bidding and Contract Documents produced by the Bureau of Public Enterprises (for public procurement works);
  • the Engineering Consultancy and Project Management Services Agreement, Charges and Conditions of Engagement, produced in conjunction with the Association of Consulting Engineers Nigeria, the Council for the Regulation of Engineering in Nigeria and the Nigerian Society of Engineers;
  • standard forms of contracts prepared by the Joint Contract Tribunal (JCT); and
  • Federal Ministry of Works contracts (a variant of JCT), etc.

Design defect liability

Does local law impose liability for design defects and, if so, on what terms?

The law does not impose liability for design defects, although the defect liability period is usually a 12-month period after practical completion and handover of the project. The contractor may be called upon where there is receipt of schedule of defects to remedy such defects and ensure the work is suitable for the purpose for which it was commissioned.


Does local law require the inclusion of specific warranties? Are there implied warranties in cases where the relevant contract is silent? Does local law mandate or regulate the duration of warranties?

Although the contract may contain warranties, there is no law requiring the inclusion of any specific warranty. The only warranties that may be implied in a construction context are those that may be implied from the sale of goods with regard to purchase orders to material suppliers.

Damages for delay

Are liquidated damages for delay in construction enforceable? Are certain penalty clauses unenforceable?

Liquidated damages for delay in construction caused solely by the contractor or its suppliers are enforceable in Nigeria. However, the sum stated as liquidated damages in the clause must be a genuine pre-estimate of the loss to be enforceable. If the sum is out of proportion to the actual loss, then the clause will be regarded as a penalty clause and unenforceable.

Indirect or consequential damages

What restrictions are imposed by local law on the contractor’s ability to limit or disclaim liability for indirect or consequential damages?

Although a contractor can limit its liability through the insertion of exclusion clauses and limiting terms in the agreement, the contractor cannot limit or exclude its liability from either damage caused by gross negligence, failure to adhere to a required standard of care or a fundamental breach.


May a contractor suspend performance for non-payment?

Yes. A contractor may suspend performance for non-payment.

Applicable clauses

Does local law restrict ‘pay if paid’ or ‘paid when paid’ clauses?

Local law allows the inclusion of ‘pay if paid’ or ‘paid when paid’ clauses in contracts.

Are ‘equivalent project relief’ clauses enforceable under local law?

Yes. If an equivalent project relief clause is included in the contract it will be enforceable under local law.

Expansion of scope of work

May the government party decide unilaterally to expand the scope of work under the PPP agreement?

No. Section 11 of the ICRCA prevents the arbitrary change, suspension or cancellation of a PPP agreement. If the government party wants to make any change in the project deliverables, it must submit this request to the PPP contractor. The proposal shall describe the nature of the variation and require the contractor to provide an assessment of the financial, technical and time implications of the change. Any proposed change should be reasonable and in proportion to the scope of the original requirement. The government party will need to provide compensation or adjust payment to the contractor if additional costs result from the change. However, these costs may be passed on to the end users through a tariff adjustment, if appropriate.

Rebalancing agreements

Does local law entitle either party to have a PPP agreement ‘rebalanced’ or set aside if it becomes unduly burdensome owing to unforeseen events? Can this be agreed to by the parties?

No. However, the national policy on PPP, an ICRCA document, sets forth provisions on ‘project risk and PPP with the federal government’ and further recommends the inclusion of a force majeure clause in a PPP agreement. The force majeure clause applies to suspend the obligations of the parties to the extent that they cannot be performed, while requiring the parties to cooperate to mitigate the effect of the intervening event. If the event continues for a prolonged period, this will give rise to a right to terminate the PPP agreement.

However, if the parties have not included any express terms in their PPP contract, the general doctrine of frustration may allow them to set aside a contract if some unforeseen event makes it impossible to perform that contract.

Liens laws

Are statutory lien laws applicable to construction work performed in connection with a PPP agreement?

There are no specific laws. The rights accrued for construction work performed in connection with a PPP agreement are dependent on the provisions of the PPP agreement. The construction contractors can also seek remedy under the general rules governing contractual transactions in Nigeria.

Other relevant provisions

Are there any other material provisions related to design and construction work that PPP agreements must address?

It is often recommended that the PPP agreement addresses caps on liability for the contractor, environmental liability insurance, political risk and environmental risks.

Operation and maintenance

Performance obligations

Are private parties’ obligations during the operating period required to be defined in detail or may the PPP agreement set forth performance criteria?

Both positions are possible under PPP in Nigeria. The duties of every party to a PPP agreement will typically be expressly set out in the agreement. Also, the national policy on PPP provides for both public-sector and private-sector performance in a PPP agreement. The private parties’ obligations will either be to an output-based or performance-based specification.

Failure to maintain

Are liquidated damages payable, or are deductions from availability payments possible, for the private party’s failure to operate and maintain the facility as agreed?

Yes. Liquidated damages are payable. The PPP agreement may include a clause on substantial liquidated damages to ensure services are delivered on time and to specifications. Failure to comply will trigger a compensation payment to the government authority in the form of damages.

The government authority can deduct from availability payments for failure of the private party to operate and maintain the facility. The right of the government party to make these deductions is stated in the national PPP policy. The payment mechanism agreed upon in the contract will define what payment adjustments will be made following a failure to meet the output specification. The contract will usually define a mechanism for dealing with persistent failures in performance. For example, the government may specify a number of penalty points that will be awarded on each failure. Accumulation of a certain number of points may result in no payment. However, the contract may allow the contractor a reasonable time period to remedy the service failure before the reduction of payments.

The regime for underperformance is contained in section 37 of the Public Procurement Act 2007, which makes provision for interest on delayed payments for more than 60 days from the date of the submission of the invoice. Such a delayed payment and all delayed payments shall attract interest at the rate specified in the contract document. All contracts shall include terms, specifying the interest for late payment of more than 60 days.

Refurbishment of vacated facilities

Are there any legal or customary requirements that facilities be refurbished before they are handed back to the government party at the end of the term?

Yes. However, they are more customary requirements. At the state level, there is the Lagos state PPP manual, which issues guidelines and recommendations on maintenance of facilities before they are handed back to the government party at the end of the contract term.

The Lagos state PPP manual recommends that the concession agreement should clearly specify the standard required of the assets on the handover date, lay out a process for monitoring the asset standards over a period leading up to the contract end date and set financial penalties for failure to meet the required standards.

Risk allocation


How is the risk of delays in commercial or financial closing customarily allocated between the parties?

The private party bears the risk of delays in commercial or financial closing. As the preferred bidder, they will incur significant bid costs at this stage and it can be difficult for the government authority to maintain the project timetable during this phase because much of the drafting of the necessary documentation is for the bidder and its advisers.

The government will normally retain some risks of delay between the submission of best and final offers and financial close. These risks are usually limited to changes in the cost of finance (particularly interest rates) within the markets generally. In the case of projects financed in whole or in part by the bond market, the public sector will take some risk in the final pricing of the bond. Inflation risk during the term of the contract is normally shared between the public and the private party through an indexation formula as projects financed through bank lending, contract and financial close may occur at the same time.

How is the risk of delay in obtaining the necessary permits customarily allocated between the parties?

The National Policy on Public Private Partnerships provides that the public party will be required to provide access to the project site as well as planning consents. However, the private party usually assumes the risk of delay in obtaining permits associated with design, construction, maintenance and operation of the project.

Force majeure

How are force majeure and geotechnical, environmental and weather risks customarily allocated between the parties? Is force majeure treated as a general concept relating to acts outside the parties’ control or is it defined with reference to specific enumerated events?

As a general rule, force majeure operates on the ‘no-fault principle’. However, PPP agreements have redefined force majeure and allocated compensation based on the role the public party had to play in the event.

A public party may bear some of the risk for non-political force majeure. Non-political force majeure events include:

  • acts of God: weather conditions, lightning, earthquake, cyclone, flood, volcanic eruption, fire or landslide;
  • strikes or boycotts; and
  • any judgment or order of any court of competent jurisdiction or statutory authority in Nigeria made against the concessionaire.

For indirect political force majeure events, the allocation of the risks involved is split between the public party and private party. Indirect political force majeure events include:

  • an act of war (whether declared or undeclared), invasion, armed conflict or act of a foreign enemy, blockade, embargo, riot, insurrection, terrorist or military action, civil commotion or politically motivated sabotage; and
  • industry-wide, state-wide or nationwide strikes, public agitation or industrial action that prevents collection of fees by the concessionaire for a period exceeding 30 consecutive days.

For political force majeure events, the allocation of the risks involved is allocated to the public party on full indemnity basis. Political force majeure events include:

  • change in law;
  • expropriation or compulsory acquisition by any governmental agency of any assets or rights of the concessionaire or a contractor; or
  • unlawful or unauthorised revocation of, or refusal to renew or grant without valid cause, any consent or approval required by the concessionaire or any of the contractors to perform their respective obligations.

Geotechnical, environmental and weather risks are also regarded as force majeure and the allocation of risks emanating from them result from external events outside the parties’ control. Therefore, such risks will usually be allocated to the party best suited to manage it, as negotiated in the contract terms.

Force majeure is usually treated as a general concept but specific enumerated events like the weather, terrorism, environmental factors, among other examples, are usually listed as non-exhaustive instances (see question 27). However, this is subject to the negotiation of the parties and the wording used in the drafting of the force majeure clause.

Third party risk

How is risk for acts of third parties customarily allocated between parties to a PPP agreement?

The authority will normally issue a full description of its proposed allocation of risks in the form of a full draft contract, risk matrix and an output specification with required performance standards and proposed remedies against non-compliance.

The general principle is that the project risks be allocated to the party best able to manage them. However, the national policy on PPP in Nigeria lists these categories of risk as those that in many cases give rise to relief events (eg, acts or omissions of government parties or failure of other authorities (including utilities providers) to give access to the site). Risk allocation in PPP in Nigeria is, however, correlated with contract negotiation.

Political, legal and macroeconomic risks

How are political, legal and macroeconomic risks customarily allocated between the parties? What protection is afforded to the private party against discriminatory change of law or regulation?

See question 35.

Macroeconomic risks, also known as financial risks, do not directly relate to the project particularly, but to the environment in which it operates. They include inflation risk, interest rate risk and exchange rate risk. The macroeconomic risks are mainly allocated to the public party. This is because PPP contracts are long-term, so the contractor may be exposed to higher costs than expected either because bid estimates were unrealistic or as a result of inflation. Inflation is a risk that may be shared between the public authority and the contractor by indexing prices to a widely available index or basket of indices.

Most political, legal and macroeconomic risks may also be covered by partial risk insurance, where a multilateral agency such as the World Bank will provide a guarantee against default by the public party (although it will require a counter-guarantee from the federal government).

The national policy guidelines on PPP in Nigeria recommend that a private party must comply with all relevant legislation throughout the contract period, even if this results in higher costs. However, if new legislation discriminates against the private party, or PPP projects generally, then the contractor may seek compensation.

Mitigating events

What events entitle the private party to extensions of time to perform its obligations?

Section 6 of the ICRCA provides that the duration for any concession shall be as specified in the agreement or contract governing the concession. However, the contract will allow the private party a reasonable period of time or an extension of time to perform the obligation that was stalled owing to forces outside the parties’ control. This is also known as relief events. Whether or not such a relief event during the construction period will result in extension of the contract term (and therefore the operating term) will depend on the project specifics or if there is any special need for the project to terminate at a particular time.

What events entitle the private party to additional compensation?

If the private party’s contract is terminated by a successor government for political reasons, the private party will be entitled to compensation.

The national policy on PPP in Nigeria recommends that, in the event that changes to the requirement become necessary during the contract term, the public party will need to provide compensation or adjust payment to the private party if additional construction or higher maintenance and operational costs result from the change.

If the public party has ownership of a risk that results in the private party being unable to deliver the service requirement, it is likely that it will need to provide compensation to make payment as though the contractor were still meeting the performance requirement. For example, the failure of either the gas distribution system or the transmission system will result in a loss of revenue to the operator of a power station and consequently a demand for compensation through the off-take or supply agreements.

Other events, such as war, terrorism, civil unrest or extreme weather may result in the public party providing compensation to the private party.


How is compensation calculated and paid?

There is no express provision under any of the PPP legislation in Nigeria on calculation of compensation to private parties. The contract term will, however, prescribe a model for calculation of compensation in the event of expropriation, war, civil disturbance, breach of contract and other event of default as per the concession agreement between the parties.

The calculation of such compensation is not mandated by law. However, the national policy on PPP in Nigeria sets forth guidelines to ensure that contractual payment obligations are met. The public party will put in place measures through the AGF to ensure that funding for payment obligations incurred through a federal PPP contract is safeguarded to ensure prompt payment, subject to appropriate authorisation. Where the financial standing of the public party and the private party is not clear on compensation, then special arrangements, such as escrow accounts, may need to be set up to reduce the reliance on financial guarantees from the government.


Are there any legal or customary requirements for project agreements to specify a programme of insurance? Which party mandatorily or customarily bears the risk of insurance becoming unavailable on commercially reasonable terms?

Yes. Legal requirements on insurance are in force. Section 7(1) and (2) of the ICRCA provides that the private party that enters into any contract for financing, construction, operation or maintenance may, subject to the provisions of the concession contract, take out insurance policy on the concession with an insurance company approved by the National Insurance Commission and maintain and repair facility during the concession period.

No party mandatorily or customarily bears the risk of insurance becoming unavailable. The PPP contract is the document that allocates all the project risks between the public and private sectors. It must, therefore, be drafted to take account of all of the circumstances that may arise to create additional costs or reduce the contractor’s revenues, and define the obligations of each party if a risk materialises.

However, the National Policy on PPP in Nigeria recommends that the public authority ought to prescribe the insurance cover to be maintained by a contractor. It also goes further to provide that risks that neither party to a PPP contract can manage be retained by the public party, which is able to diversify risk across a large portfolio of projects and raise taxes to meet future liabilities.

Default and termination


What remedies are available to the government party for breach by the private party?

Under the 1999 Constitution of the Federal Republic of Nigeria, as amended, matters including government parties and its agencies go to the federal High Court of the state where the breach was committed. The government party can, however, proceed to seek the following remedies available under Nigerian law of contract for breach of contract terms:

  • claim for damages;
  • court order for specific performance by the defaulting private party;
  • injunction restraining the defaulting party from a continued breach;
  • indemnification of the government party for acts or omission of third parties; and
  • termination rights for breach of the contract terms.


On what grounds may the PPP agreement be terminated?

Termination rights or clauses are usually expressly set out in the PPP agreement. These include termination for:

  • the determination of the PPP agreement because of project maturity;
  • the granting of any judgment or the passing of any resolution for the dissolution or judicial management or liquidation of the private party;
  • the private party’s approval of a resolution for the winding up, liquidation or appointment of a liquidator or receiver;
  • failure of the private party to achieve financial close in accordance with the agreement;
  • changes in government policy;
  • failure to maintain the requisite forms of insurance;
  • occurrence of a natural force majeure event for a continuous period;
  • material breach of its obligations to perform the operation and maintenance of the service provided, as was the case with the Lagos-Ibadan Expressway concession termination in Nigeria;
  • general breach of contract terms;
  • remedy defaults or breaches within an applicable cure period;
  • grounds of public interest;
  • insolvency of the private party, core contractors or core guarantors; and
  • the government party’s convenience, with notice.

Is there a possibility of termination for convenience?

Yes. The government typically reserves the right to termination of a contract in the public’s interest.

If the PPP agreement is terminated, is compensation available?

Yes. Compensation for termination is available under the PPP agreement in Nigeria. The amount of compensation is usually a matter of extensive negotiation between the government party and the private party (and of great concern to lenders). Typically, the contract term will contain detailed provision on compensation to the parties under a PPP agreement in the event of termination.

A convenience termination at least allows the private party to recover costs incurred and reasonable profit for work performed prior to the termination unlike termination because of default by the private party.

Where termination is because of the private party’s default, the third-party investors will usually require a direct agreement with the authority to allow them to replace a failing contractor before the contract is officially terminated by the authority. All sums owed to the government party and all necessary security refunds shall be paid as compensation to the government party.

In the event of termination because of the government party’s default, the private party will generally be compensated for debt, lost profit and breakage costs.

Where termination is because of an extended force majeure event, compensation will include:

  • compensation for debt and equity capital (but usually not lost profits);
  • some breakage costs;
  • the amounts accrued and payable to the private party as at the termination date that remain unpaid;
  • amounts due and payable to the major subcontractors in respect of works done prior to the termination period; and
  • other capital and interest charges due to the senior lender or multilateral agencies.


Government financing

Does the government provide debt financing or guarantees for PPP projects? On what terms? Which agencies are responsible?

Yes. The federal government provides debt financing under PPP by the issue of their securities under the authority of the Debt Management Office (DMO) and listing such bonds or securities under the Nigerian Stock Exchange. When the public purchase federal government of Nigeria (FGN) bonds, they are lending to the federal government for a specified period of the PPP projects. Such FGN bond proceeds are subsequently used to restructure the existing debt stock of short-term debt to longer-term obligations under PPP projects in Nigeria.

Also, if the lenders or investors are not confident about the robustness of the PPP project cash flows, they may require financial support from the government in the form of a grant, guarantee or equity contribution to provide them with additional comfort for investing in the project. In some cases, government capital may be used as equity in a special purpose vehicle (SPV) or joint venture that contracts to provide services towards a PPP project.

Section 3 of the ICRCA expressly prevents any guarantee on a concession agreement by the federal government without the federal executive council’s approval. This provision allows the government to provide guarantees for PPP projects in Nigeria, which cover debt, exchange rates, local currency conversion, permitted tariff levels, and the demand for services or compensation of termination, etc, epitomised by the 30-kilometre long Lekki-Epe Expressway in Lagos. This PPP project, which was initiated by Nigerian federal and state governments alike, eventually achieved financial closure largely because the federal and Lagos state governments provided guarantees to cover the project’s accrued debt owed to the financial institutions financing the project.

The agencies responsible for coordinating and regulating debt financing for PPP projects include:

  • the DMO: established on 4 October 2000 to centrally coordinate the management of Nigeria’s debt;
  • the Nigerian Stock Exchange (NSE): one of the leading securities exchange markets in Africa and the securities exchange platform where government bonds are listed and traded. The NSE is regulated by the Nigerian Securities and Exchange Commission (SEC);
  • the SEC: the primary regulatory institution of the Nigerian capital market, supervised by the Federal Ministry of Finance (MoF);
  • the MoF: the government body that manages Nigerian government finances, including managing, controlling and monitoring federal revenues and expenditures. Responsibilities include managing federal debt and regulating the capital market;
  • the Federal Executive Council: serves as the cabinet and the executive branch of government of Nigeria. Its cabinet members are appointed by, and report to, the President. The cabinet oversees federal ministries (including the MoF);
  • the Central Securities Clearing System: a subsidiary of the NSE and is licensed by the SEC as a capital market agent to handle central depository, clearing and settlement services for securities traded in the Nigerian capital market; and
  • the AGF: the administrative head of the Nigerian treasury and is appointed by the President. Responsibilities include general supervision of federal government expenditure.

Privity of contract

Are lenders afforded privity of contract with the government party through direct agreements or similar mechanisms? What rights will lenders typically have under these agreements?

Lenders usually enter into direct agreements with the government party, which affords them privity of contract. The provisions of the agreement usually acknowledge their financial rights, facilitate the exercise of those rights and give the financiers or third-party investors a direct agreement with the authority to allow them to replace a failing contractor before the contract is terminated by the government party.

Step-in rights

Is there a mechanism under which lenders may exercise step-in rights or take over the PPP project? Are lenders able to obtain a security interest in the PPP agreement itself?

Yes. National policy on PPP in Nigeria makes provision for the step-in regime, which is usually included in direct agreements between the lenders, the government party and the private party. The lenders may exercise this right in the event of extended or continuous default by the private party. These step-in rights allow the lender to take over the PPP project or assist a defaulting private party to stop his or her wrongdoing before the government party exercises its termination option.

The lenders are able to obtain a security interest in the PPP agreement in the form of capital and interest charges due to the private party under the SPV.

Cure rights

Are lenders expressly afforded cure rights beyond those available to the project company or are they permitted to cure only during the same period and under the same conditions as the project company?

The lenders will typically have cure rights in addition to any rights granted to the project company.


If the private party refinances the PPP project at a lower cost of funds, is there any requirement that the gains from such refinancing be shared with the government? Are there any restrictions on refinancing?

The government will usually enjoy a large share of a refinancing gain. Generally, government consent is required for refinancing, however, the PPP contract will usually set out the terms of the partnership and potential restrictions on refinancing.

Governing law and dispute resolution

Local law governance

What key project agreements must be governed by local law?

Typically, project agreements for PPP contracts to be carried out in Nigeria will be governed by existing local law. There is no express legal provision mandating this, although sector-specific regulations and legislation exist making it impracticable for project agreements to be governed by foreign law. Nonetheless, dispute resolution under this project agreement can be governed by foreign law, an example of which is the project agreement governed by Nigerian law with a dispute resolution clause stating that arbitration will be in accordance with English rules.

Government immunity

Under local law, what immunities does the government party enjoy in PPP transactions? Which of these immunities can be waived by the government?

Apart from section 308 of the Constitution of the Federal Republic of Nigeria 1999, (as amended), which provides for immunity against civil or criminal prosecution for the president, state governors and their deputies while in office, there are generally no government party immunities under Nigerian law.

Moreover, parties to PPP contracts will typically include a ‘waiver of sovereign immunity’ clause in their agreement to ensure the government party assumes full liabilities and risks under the PPP.

Availability of arbitration

Is arbitration available to settle disputes under the project agreement between the government and the private party? If not, what regime applies?

Yes. Under the legal framework of the ICRCA, arbitration is available to settle PPP disputes in Nigeria.

Generally, the contract specifies which methods of dispute resolution will be used to settle any disputes arising between the parties, and the rules and procedures to be followed. The commonly used methods for dispute resolution include mediation, arbitration, conciliation and, failing all else, legal proceedings.

Alternative dispute resolution

Is there a requirement to enter into mediation or other preliminary dispute resolution procedures as a condition to seeking arbitration or other binding resolution?

There is no requirement to seek mediation prior to arbitration. Most contracts will include the agreed mechanism for settling disputes. The ICRC recommends that this framework leads to quick, amicable dispute resolution. Consequently, most PPP contracts will make prior mediation a condition before seeking arbitration.

Special mechanisms

Is there a special mechanism to deal with technical disputes?

Yes. Expert opinion is often sought during the determination process of a technical dispute.

Typically, an independent expert on technical issues is appointed to give an objective expert opinion, and this is adopted in the evaluation of technical disputes. Nigerian local law (Evidence Act 2011), courts of law and alternative dispute resolution schemes all recognise an expert’s opinion on technical disputes.

Updates and trends

Updates and trends

Updates and trends

Following the recent decline in global crude oil prices and the consequential decreases in oil tax revenue, the Nigerian government has increased its focus on other sources of tax revenue generation. One new area of focus is transfer pricing (TP) auditing conducted by the Nigerian tax authority - the Federal Inland Revenue Service (FIRS) - resulting in assessments of additional tax liabilities against tax payers who fail to abide with the provisions of extant TP regulations.

In August 2018, the FIRS published the Income Tax (Transfer Pricing) Regulations 2018 (the 2018 Regulations), which repeal the Income Tax (Transfer Pricing) Regulations No. 1, 2012 (the 2012 Regulations). The newly introduced 2018 Regulations align with the Organisation for Economic Cooperation and Development (OECD) Transfer Pricing Guidelines (TP Regulations). Since the TP Regulations came into force in 2012, taxpayers have complied by submitting annual transfer pricing returns and transfer pricing documentation. The FIRS has also undertaken numerous transfer pricing audits of enterprises since the TP Regulations came into force.

Issues of note and trends relating to TP

Repeal of the Income Tax (Transfer Pricing) Regulations No. 1, 2012 and the introduction of the Income Tax (Transfer Pricing) Regulations 2018

The 2018 Regulations was introduced by the FIRS in 2018 to repeal the 2012 Regulations owing to some issues with the latter which include:

  • the vague definition of ‘connected taxable persons’;
  • the lack of express provision on the TP documentation requirement;
  • an advanced pricing arrangement provision that is yet to be implemented; and
  • vague penalty provision.

The inherent issues with the 2012 Regulations were addressed under the 2018 Regulations. Unlike the 2012 Regulations, with their vague penalty clause, the 2018 Regulations introduced specific provisions on administrative penalties for TP-related offences to ensure clarity.

Other significant changes introduced under the 2018 Regulations include the following:

  • Threshold for maintaining contemporaneous documentation: a connected person whose total value of controlled transactions is less than 300 million nairas is no longer required to maintain contemporaneous documentation. However, such a connected person will be required to prepare and submit relevant documentation within 90 days upon receipt of a notice from the FIRS.
  • A new safe-harbour regime where taxpayers may be exempted from verifying the arm’s-length nature of controlled transactions if controlled transactions are priced in accordance with the guidelines published by the FIRS, as opposed to the adoption of statutory or ‘regulator prescribed’ prices as contained in the 2012 Regulations.
  • Introduction of specific criteria for determining the arm’s length nature of intra-group transactions.
  • Inclusion of guidelines on the use of quoted prices in determining the pricing for the exportation and importation of commodities: customs valuation prices applied for customs valuation purposes will not automatically be accepted by the FIRS as arm’s length for TP purposes.
  • Inclusion of clear procedures and document requirements for the application for advance pricing agreements.

OECD Base Erosion and Profit Shifting implementation

The Nigerian tax authorities are largely focused on implementing the BEPS project as a means of preventing tax avoidance and tax evasion. The OECD defines BEPS as tax avoidance strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations. BEPS can be direct or indirect movement of taxable profits from one tax jurisdiction to another in order to reduce the effective tax liability of a multinational enterprise. To address the problem of BEPS, the OECD, with the backing of the Group of Twenty (G20), introduced the BEPS project in 2013. This project is aimed at equipping governments with the domestic and international instruments needed to tackle base erosion and profit shifting. It sets out 15 actions to fundamentally change the rules for the taxation of cross-border profits. The OECD’s final BEPS reports - released on 5 October 2015 - provide guidance, recommendations and minimum standards on the 15 action plans. Since the start of the BEPS project, Nigeria has worked alongside other non-OECD countries on an equal footing to build consensus on the project’s final outcomes. The BEPS Action Plan is based on three broad principles: coherence in tax systems, substance in cross-border dealings and transparency across governments and entities. After release of the first set of BEPS Action Plans, the FIRS has incorporated several aspects of the BEPS deliverables into its TP audit process.

Notable TP developments following the BEPS Action Plans

Nigeria signs the OECD’s multilateral instrument to curb tax avoidance and evasion

Implementing the BEPS Action Plan, participating countries made changes to the local tax legislation and double taxation agreements they have with other countries. On the 17 August 2017, Nigeria signed the OECD’s Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (Multilateral Instrument (MLI)) and the Common Reporting Standard Multilateral Competent Authority Agreement (CRS MCAA). The MLI is a legal instrument designed to prevent base erosion and profit shifting by multinational enterprises. It allows jurisdictions to transpose results from the OECD/G20 BEPS project into their existing networks of bilateral tax treaties in a quick and efficient manner, including adopting minimum standards for implementation in tax treaties to prevent treaty abuse and ‘treaty shopping’. The CRS MCAA is a multilateral competent authority agreement, which aims to implement the automatic exchange of financial account information pursuant to the OECD/G20 Common Reporting Standard and to deliver the automatic exchange of CRS information between 101 jurisdictions by 2018.

Income Tax (Country-by-Country Reporting) Regulations 2018

Nigeria recently issued the Income Tax (Country-by-Country Reporting) Regulations 2018 (CbCR Regulations). The CbCR Regulations form part of the BEPS Action 13 implementation plans. The CbCR Regulations compliment Nigeria’s membership of the Multilateral Competent Authority Agreement (MCAA) to automatically exchange country-by-country reports, which was ratified by the Federal Executive Council in August 2017. The CbCR Regulations provide guidance to multinational enterprises on their reporting obligations to the FIRS in relation to their group income, taxes paid and other indicators of their economic activity. This information enables the FIRS to perform high-level TP risk assessments and evaluate other BEPS-related risks. Issuing the CbCR Regulations further underscore Nigeria’s resolve to fight aggressive tax avoidance schemes and profit shifting. The CbCR Regulations shall empower the FIRS to put in place adequate frameworks and mechanisms enabling it to collaborate with the revenue authorities of other tax jurisdictions combating BEPS.


Nigeria has demonstrated significant efforts towards improving its TP regime in line with the BEPS Action Plan. These efforts include the repeal of the 2012 Regulations and the introduction of the 2018 Regulations in line with the BEPS Action Plan and OECD Guidelines, as well as signing the treaty to curb TP tax avoidance and tax evasion. These efforts have led local and multinational companies to bring their business models in line with evolving TP regulations. In light of these developments, taxpayers will need to review their ‘related party-connected person’ transactions and relevant documents to ensure that they are fully compliant with the arm’s length principle and documentation requirements. This will help mitigate the risks associated with the incidence of significant assessment of additional tax liabilities and administrative penalties.