Over the last 12 months, Nigeria has seen significant activity in the private equity (PE) and mergers and acquisitions (M&A) space, with clear trends emerging across technology, energy, consumer markets, and financial services. PE has been particularly robust in the technology sector, particularly in fintech and e-commerce. Driven by the country’s young, tech-savvy population seeking digital payment solutions and purpose-driven brands, investors are flowing into companies that combine strong ESG credentials with high-growth potential.

Nigeria has recorded a series of landmark PE deals in the past year, reflecting both sectoral diversification and increasing sophistication of deal structures. Notable among these are:

• Goodwell Investments and Alitheia Capital’s pioneering investment in Hinckley E-Waste Recycling via the uMunthu II Fund, marking Nigeria’s first PE-backed waste management transaction and signaling growing appetite for ESG-aligned opportunities;
• Afrigreen Debt Impact Funds USD15 million facility to Watt Renewable Corporation, financing the rollout of hybrid solar power plants and underscoring PE’s pivotal role in Nigeria’s green energy transition;
• DPI’s Series C investment in Moniepoint, which consolidates fintech as the dominant recipient of growth capital;
• Afreximbank’s USD20.8 million investment in Starlink Global; and
• the Bank of Industry iDice Programme sponsored by the African Development Bank for creatives in the tech and creative sectors, to demonstrate the sustained investor confidence in Nigeria’s digital infrastructure and financial services ecosystem.

Collectively, these deals illustrate how PE investors are deploying capital not only to capture high-growth opportunities but also to drive structural transformation across Nigeria’s economy.

In the M&A space, international oil companies continued strategic divestments of their onshore assets, reshaping the energy sector landscape. Landmark transactions included Shell International B.V.’s sale of Shell Petroleum Development Company of Nigeria to Renaissance Africa Energy Company (on whichG. Eliasacted as legal advisers to Shell), Heirs Holdings’ acquisition of 45% participating interest in OML 17, and Seplat’s acquisition of ExxonMobil’s onshore assets. These transactions highlight a significant shift toward localisation of oil and gas operations, with domestic and regional players assuming greater control over Nigeria’s energy resources.

Other sectors also witnessed transformative M&A activity. In FMCG, Tolaram Group’s acquisition of Diageo’s 58.06% equity stake in Guinness Nigeria (on which G. Elias acted as legal advisers to Tolaram), reflected continued foreign interest in Nigeria’s robust consumer market. The financial services sector witnessed transformative activity through the formal authorisation by the Central Bank of Nigeria of the merger of Nigeria’s second oldest bank, Union Bank of Nigeria Plc, with Titan Trust Bank, exemplifying the ongoing banking sector recapitalisation and consolidation efforts that are reshaping the country’s financial landscape.

In 2025, Nigeria’s sectoral activity has primarily been driven by technology and innovation, digital financial services, and consumer-facing businesses, all of which remain attractive to private equity investors despite broader macroeconomic headwinds. According to AVCA, technology-driven innovation remained the dominant theme across sectors in H1 2025.

In Nigeria, monetary policy tightening aimed at tackling inflation increased cost of capital, dampening large PE transactions, discouraging drawdowns, and reducing exit multiples. Despite this, investors continue to prioritise opportunities in high-growth, tech-enabled sectors, particularly those aligned with demographic shifts toward digital adoption and sustainability. Additionally, high yields in Nigeria attracted foreign flows in fixed-income and bond markets, especially for instruments denominated in US dollars. The Federal Government of Nigeria’s US Dollar Bonds issued in August 2024 were oversubscribed by 180%, even as activity in the domestic naira bond market slowed sharply amid investor caution over significant currency volatility.

Regulatory reforms, policies, strategic repositioning, and, partially, oil-price volatility have shaped transaction activity. International Oil Companies such as Shell and ExxonMobil sold their onshore assets to Nigerian companies such as Renaissance Africa Energy and Seplat – transactions that realign Nigeria’s energy sector while creating entry opportunities for private capital to finance domestic operators and related infrastructure.

Very recently, the Financial Action Task Force (FATF) removed Nigeria from its grey list. This removal will likely ease capital inflows and improve investor confidence in the Nigerian markets.

Thus, while macroeconomic conditions have tempered overall activity, Nigeria’s M&A market remains resilient, with a sustained appetite for technology, consumer markets, and localised energy opportunities.

The Investment and Securities Act, 2025

The most significant legal development affecting PE in Nigeria is the enactment of the Investments and Securities Act, 2025 (the ISA), which repeals and replaces the Investments and Securities Act, 2007 (the “Repealed Act”). The ISA brought with it significant changes to the regulatory framework for private capital. Key reforms include the following.

• Expanded definition of Collective Investment Schemes (CIS): Under the Repealed Act, the definition of CIS seemed limited to open-ended investment schemes, which created uncertainty around whether PE and VC funds could be structured and regulated as CISs in Nigeria. The ISA, however, expands the definition of a CIS to include close-ended investment schemes offered to qualified investors, thereby providing the regulatory basis for PE and VC funds to be established as CISs under Nigerian law. While PE and VC funds are not expressly named, the broader CIS definition under Sections 150 and 151 now accommodates their structure and investment approach.
• Stronger regulatory framework and enforcement: The ISA has strengthened the regulatory framework for foreign CISs marketing to Nigerian investors, although the core prohibition on unauthorised marketing remains unchanged from the Repealed Act. What has shifted significantly is the penalty regime. Under the Repealed Act, foreign schemes faced only NGN100,000 base fines for marketing without SEC approval. The ISA, by Section 193, however, imposes substantially higher penalties of NGN10,000,000, or 10% of the gross value of interests offered (whichever is higher) for unauthorised marketing.
• Custodial arrangements: Under the ISA, all CISs domiciled in Nigeria are required to appoint SEC-registered custodians or trustees to hold fund assets, making custodial arrangements directly relevant to Nigerian PE fund structures which are set up as a CIS. Custodial arrangements have been reformed under Section 181, with significant implications for fund managers. Previously, under Section 183 of the Repealed Act, custodians had dual obligations to indemnify both investors and fund managers for losses caused by negligence or wilful default. The ISA has, however, revised this provision and limits the application of statutory indemnity protection strictly to investors, removing automatic indemnification for fund managers. This change requires fund managers to negotiate strong contractual indemnities in custody agreements and other service agreements to ensure that they have adequate coverage for losses resulting from misconduct of the custodian, as the statutory safety net for managers no longer exists.
• Investor protection: The ISA has significantly enhanced investor protection by the express criminalisation of client asset misappropriation under Section 169. The ISA prohibits misuse of client assets by fund managers, trustees, or custodians, with penalties of the greater of NGN50,000,000 or four times the profit derived from misconduct, plus daily fines and mandatory investor compensation. With this provision, fund managers face potential imprisonment of up to two years for egregious breaches, emphasising the personal accountability of those managing private capital vehicles and reinforcing the absolute importance of proper asset segregation and internal controls.
• Robust mechanisms for systemic risk management: By Sections 82–85, the ISA specifically vests the SEC with regulatory oversight to monitor, address and issue directives for the management of systemic risk. This brings the law in tandem with global standards, and will potentially increase investor (including PE investors) confidence in the Nigerian markets.

The Nigeria Tax Act, 2025

Although not effective until 1 January 2026, the Nigeria Tax Act, 2025 (the “Tax Act”) passed in June 2025 introduces key provisions that will affect PE investments by 2026.

One of the most far-reaching changes under the Tax Act is the significant restructuring of the capital gains tax (CGT) regime. The CGT rate applicable to companies has increased from 10% to 30%, aligning it with the companies’ income tax rate. The increased CGT will greatly impact on entry and exit options for PE investors. The foregoing notwithstanding, the Tax Act exempts gains accruing from the disposal of assets by an angel investor, venture capitalist, PE fund, accelerators or incubators with respect to a labelled startup, provided the assets have been held in Nigeria for a minimum of 24 months from income tax and CGT. Please see Chapter 8, part 1 (para. m) of the Tax Act.

Companies and Allied Matters Act, 2020 (as amended) (CAMA 2020)

The Companies and Allied Matters Act 2020, which repealed the 1990 Act, represents the most comprehensive overhaul of Nigeria’s company law in three decades. Signed into law on 7 August 2020, CAMA 2020 introduced several provisions that have directly impacted PE structuring and operations in Nigeria.

• Single-shareholder companies: One of the most significant changes introduced by CAMA 2020 is the elimination of the mandatory two-shareholder requirement for private companies. By Section 18(2) of CAMA 2020, a private company can now be incorporated and maintained with just one shareholder. This single-shareholder provision has streamlined holding company structures, allowing PE investors to establish wholly owned special purpose vehicles (SPVs) without requiring nominee arrangements, and does away with the administrative burden associated with maintaining multiple shareholders.
• Introduction of limited partnerships and limited liability partnerships: Perhaps the most transformative aspect of CAMA 2020 for the private equity industry is the introduction of limited partnerships (LPs) and limited liability partnerships (LLPs) as recognised business vehicles under Nigerian law. Part C of CAMA 2020 establishes the legal framework for LLPs, while Part D governs LPs. Prior to CAMA 2020, Nigeria, at the federal level, did not have statutory provisions recognising these structures, forcing most PE funds targeting Nigerian investments to domicile offshore in jurisdictions such as Mauritius, the Cayman Islands, or Delaware.

Business Facilitation (Miscellaneous) Provisions Act, 2023 (BFA)

The BFA, signed into law on 3 July 2023, introduced targeted amendments to multiple business laws, including CAMA 2020, aiming primarily to ease the conduct of business in Nigeria. While the Act addressed various business environment challenges, its most significant impact on private equity relates to pre-emptive rights in private companies.

Section 32 of the BFA amended Section 142 of CAMA 2020, which governs pre-emptive rights (also known as pre-emption rights or rights of first refusal) for existing shareholders when a company proposes to issue new shares. Under the original CAMA 2020 provision, existing shareholders had a statutory right to subscribe to new shares in proportion to their existing holdings, but the Act did not specify a time limit for exercising this right. This created significant practical challenges for PE transactions. In addition, there is now a 21-day time limit for existing shareholders to exercise their pre-emptive rights, failing which the company can proceed to issue the shares to others on the same or not more favourable terms.

This seemingly technical amendment has had profound practical implications for PE deal execution. Prior to this change, the absence of a statutory deadline meant that existing shareholders could potentially delay financing rounds indefinitely by neither accepting nor declining their pre-emptive rights.

Sundry Amendments to the Securities and Exchange Commission Rules, April 2025

The new private equity framework in Nigeria introduces several significant changes aimed at easing compliance and strengthening alignment between fund managers and investors.

Firstly, PE funds intended to be domiciled in Nigeria with a target size of NGN5 billion or less, up from NGN1 billion, are now exempt from full SEC registration, provided they file their governing documents and obtain a “no-objection” from the SEC.

To ensure proper GP-LP alignment, general partners are now required to commit at least 3% of the fund’s size when targeting pension funds as limited partners, or 1% where a sovereign wealth fund or development finance institution (DFI) is an LP.

In terms of valuation, the statutory requirement for fair market value has been replaced with a more flexible “good faith” standard, allowing valuations to follow any methodology approved by the fund’s Advisory Board.

The investment concentration limit has also been relaxed, permitting up to 70% of a fund’s assets to be invested in a single portfolio company – an increase from the previous 30% cap. Finally, the new rules codify the traditional “2 and 20” fee structure, capping management fees at 2% and carried interest or performance fees at 20% for funds raising capital from Nigerian investors.

Nigeria Start-Up Act 2022

On 19 October 2022, the President of the Federal Republic of Nigeria signed into law the Nigeria Startup Act, 2022 (the NSA). The NSA establishes a legal and institutional framework for the advancement of labelled startups in Nigeria and creates an enabling environment that promotes their formation, growth, and operation.

One of the key incentives under the NSA is the Investment Tax Credit, which entitles an investor to a 30% tax credit of its investments in a labelled startup. This credit may be applied to offset any tax payable on investment returns, notwithstanding the provisions of the Companies Income Tax Act. However, as the NSA specifically references only corporate investors, individuals or non-corporate entities may not be eligible for this incentive.

The NSA also provides an exemption from Capital Gains Tax (CGT) on gains arising from the disposal of labelled startup assets held for at least 24 months.

Furthermore, foreign investors are permitted to repatriate proceeds from investments in labelled startups in freely convertible currency at the Central Bank of Nigeria’s official exchange rate, subject to presentation of a Certificate of Capital Importation.

Lastly, the NSA extends existing incentives under the Nigeria Export Processing Sones Act, 1992 (NEPZA Act) to accelerators and incubators operating within approved technology development zones. Such entities are exempt from all federal, state, and local government taxes, levies, and rates, in line with the NEPZA framework.

Primary Regulators for PE Funds and Transactions

PE funds and transactions in Nigeria are regulated by multiple agencies, reflecting the cross-sectoral nature of private capital, as follows.

• Securities and Exchange Commission (SEC): the primary regulator for PE fund formation, registration, and compliance under the ISA.
• Corporate Affairs Commission (CAC): incorporation of PE funds and corporate filings.
• Federal Competition and Consumer Protection Commission (FCCPC): merger control for non-financial sectors and the anti-trust regulator.
• Nigerian Investment Promotion Commission (NIPC): foreign investment regulation and registration.
• Economic and Financial Crimes Commission (EFCC): anti-money laundering and anti-corruption enforcement.
• Federal Inland Revenue Services (FIRS): taxation.
• Central Bank of Nigeria (CBN): financial services transactions, M&A and monetary policy.
• Other sector-specific regulators.

Key Regulators for M&A Activity and Merger Control

The FCCPC is the primary merger control authority under the Federal Competition and Consumer Protection Act, 2018. The FCCPC governs merger review and approval for all sectors except as it relates to banks and other CBN-licenced financial institutions, as BOFIA makes the CBN the exclusive regulator for mergers between banks and other CBN-licenced financial institutions. The FCCPC reviews notifiable transactions and assesses potential anti-competitive risks and consumer welfare impacts. For PE-backed buyers, the FCCPC applies the same merger control standards as for strategic buyers, focusing on competition, competitive effects, and consumer welfare impact rather than the financial nature of the acquirer.

In addition to the FCCPC, PE transactions are subject to sector-specific regulatory oversight, particularly for heavily regulated industries. These sector-specific authorities also make some competition assessment for the sector in addition to the regulator’s core focus. This creates a regulatory matrix where PE funds must navigate multiple approval processes depending on their target sectors. Importantly, the FCCPC also asserts jurisdiction over foreign-to-foreign mergers with a nexus to Nigeria, ensuring that offshore PE acquisitions that impact Nigerian markets remain subject to domestic scrutiny.

Foreign Investment and National Security Regulation

The NIPC regulates foreign direct investment under the NIPC Act, which permits 100% foreign ownership of equity in Nigerian entities, subject to registration requirements and sector-specific restrictions. The NIPC maintains a negative list under Section 32 prohibiting certain business activities for both foreign and Nigerian investors, but does not differentiate between financial investors and strategic buyers in its foreign investment framework.

Nigeria does not currently operate a formal national security screening regime comparable to the Committee on Foreign Investment in the US (CFIUS) or similar mechanisms in other jurisdictions. Foreign investment screening in Nigeria is primarily subject to sectoral restrictions rather than national security considerations, although sensitive sectors such as defence, petroleum upstream operations and telecommunications infrastructure face additional regulatory scrutiny through sector-specific legislation.

PE Specifics and Treatment

Nigerian regulators do not distinguish between sovereign wealth investors and other financial investors in their treatment of PE transactions. The regulatory framework applies uniformly to all PE investors regardless of whether they are sovereign wealth funds, pension funds, or private institutional investors. However, sovereign wealth investors may benefit from access to diplomatic channels, certain tax exemptions and government-to-government relationships that could help facilitate regulatory approvals, although these benefits occur informally rather than through formal regulatory preferences.

The FCCPC’s Guidelines on the Simplified Process for Foreign-to-Foreign Mergers with Nigerian Component (the “Guidelines”) deals with changes of control of Nigerian businesses arising from mergers and acquisitions outside the country, including offshore PE transactions affecting Nigerian assets or companies. The Guidelines clarify that such foreign-to-foreign mergers remain subject to domestic merger control if notification thresholds are met. More so, the Guidelines provide a simplified and expedited approval process for such mergers, reducing regulatory burdens while ensuring continued oversight of transactions with material Nigerian implications.

EU Foreign Subsidies Regulation (FSR) Relevance

Generally, the EU Foreign Subsidies Regulation is not relevant to PE transactions in Nigeria, as Nigeria is not subject to the laws of the EU. Thus, Nigerian PE funds typically do not fall within the EU FSR’s scope. However, where a Nigerian fund is investing in EU-based targets or receiving EU subsidies or financial grants for the purpose of the transaction, the EU FSR will apply to this extent.

Recent Developments in Anti-Bribery, Sanctions and ESG Compliance

The EFCC has intensified anti bribery enforcement activities in 2024–25.

ESG principles have gained significant regulatory attention following global trends and investor demands. While Nigeria lacks comprehensive ESG legislation, PE funds increasingly face investor pressure to demonstrate ESG compliance in portfolio companies, particularly in cross-border investments and by development finance institutions.

Sustainability has fast become a key global and national priority, with governments and regulators increasingly promoting responsible business practices. To establish a consistent global framework for sustainability-related financial disclosures, the International Sustainability Standards Board (the ISSB) issued the IFRS S1 and S2 Sustainability Disclosure Standards, covering governance, strategy, risk management, and metrics on sustainability and climate-related risks. These standards, launched globally and in Nigeria on 26 June 2023, took effect from 1 January 2024.

At COP 27 in November 2022, Nigeria, through the Financial Reporting Council of Nigeria (FRCN), announced its intention to be an early adopter of these standards. To this end, the Adoption Readiness Working Group (ARWG) was inaugurated on 6 June 2023 to drive implementation. The FRCN subsequently issued a Public Notice inviting entities to participate as early adopters. An early adopter is any reporting entity electing to adopt the IFRS S1 and S2 Standards for the accounting period ending on or before 31 December 2023, ahead of their effective date.

Following the early adoption phase, voluntary adoption of the IFRS S1 and S2 Standards commenced for accounting periods beginning on or after 1 January 2024 and will continue until 31 December 2027. Entities wishing to adopt voluntarily during this period must undergo a readiness test assessment by the FRCN to qualify as voluntary adopters. Thereafter, mandatory adoption will begin on or after 1 January 2028 for all entities except government and government organisations.

Public Interest Entities (PIEs) such as regulated non-listed entities; public limited companies; private companies that are holding companies of public and regulated entities; concession entities; privatised entities in which the government retains an interest; entities engaged by any tier of government in public works with annual contract sum of NGN1billion and above and settled from public funds; government licensees; and all other entities with an annual turnover of NGN30 billion and above – will all be required to adopt from 1 January 2028. This mandatory adoption, however, excludes governments and government organisations. Small and medium-sized entities (SMEs) will adopt from 1 January 2030. Importantly, all mandatory adopters must also undergo an FRCN readiness assessment before publishing their first sustainability report aligned with the IFRS ISSB Standards.

For PE funds and investors, the mandatory adoption phase carries significant implications. From 2028, portfolio companies classified as PIEs will be legally required to comply with IFRS S1 and S2, embedding sustainability disclosures into their financial reporting cycle.

Furthermore, mandatory adoption will influence valuation, investor confidence, and access to global capital. PE investors with portfolios aligned to IFRS S1 and S2 will be better positioned to attract ESG-focused institutional capital, participate in international co-investments, and achieve smoother exits, particularly in jurisdictions where sustainability compliance is now a prerequisite.

Notable Recent Regulatory Evolution

Recent notable developments include the following.

• NIPC fee revisions: The revision of the NIPC service fees, effective January 1, 2025, underscores the government’s drive to strengthen regulatory compliance and administrative efficiency in investment registration and monitoring.
• FCCPC merger review upgrades: The FCCPC has also strengthened its merger review capabilities with improved digital platforms and enhanced international cooperation mechanisms. 
• CBN recapitalisation programme: CBN’s recapitalisation regulations for banks have created increased M&A activity, creating attractive opportunities for PE funds seeking exposure in the banking sector.
• ISA implementation: The implementation of the ISA represents the most significant regulatory evolution in recent times, introducing enhanced compliance requirements and substantially increased penalties for violations. This legislative transformation positions Nigeria’s regulatory framework more closely with international standards while imposing greater operational discipline on PE participants.
• Nigerian Insurance Industry Reform Act, 2025: The recent enactment of the new insurance act ushers in a comprehensive regulatory overhaul for the Nigerian insurance sector, introducing higher minimum capital requirements for insurance and reinsurance firms along with stricter penalties for non-compliance. For PE investors, these reforms present both challenges and opportunities, creating a more transparent and better-capitalised sector which is attractive for capital inflows, strategic partnerships, acquisitions and divestments, as stronger players emerge under the new regime.

The scope and depth of legal due diligence in Nigerian PE transactions typically depend on transaction size and structure, sector sensitivity, the party conducting the due diligence and investor sophistication. However, given Nigeria’s intricate regulatory landscape and frequent compliance uncertainties, due diligence exercises are generally comprehensive and risk oriented. The objective is to identify legal and regulatory risks that could materially affect investment returns, valuation, or exit strategies.

Legal due diligence investigations in Nigeria are typically conducted by experienced domestic law firms with M&A/PE expertise, often in coordination with international counsel for cross-border transactions. Due diligence is usually conducted through reviewing and analysing documentation provided to the counter party via virtual data rooms, supplemented by independent regulatory verification and public searches. For large M&A/PE transactions, legal due diligence exercise is often conducted simultaneously with tax, financial, commercial, operation and ESG due diligence streams to ensure a fully integrated assessment of the target’s risk profile.

Key Areas of Focus for Legal Due Diligence

• Corporate structure and governance: Examination of incorporation documents, capitalisation tables, beneficial ownership disclosures, shareholder agreements, and compliance with CAC filings. This review also tests governance frameworks, board composition, and alignment with shareholder rights or exit mechanisms.
• Regulatory compliance and licensing: Verification of sector-specific approvals and permits and assessment of compliance exposure that may impede operations or trigger post-acquisition liabilities.
• Assets: Review of titles to real property, security interests, plant and equipment ownership, and intellectual property registrations, especially for technology and manufacturing assets.
• Tax compliance: Review of FIRS filings, withholding tax obligations, transfer pricing documentation, and eligibility for incentives.
• Material contracts: Analysis of key commercial contracts for change-of-control provisions, exclusivity clauses, termination rights, or third-party consent requirements that may affect post-closing integration.
• Employment and labour relations: Labour Act compliance, statutory contributions, immigration requirements.
• Insurance: Review of existing coverage for operational, environmental, and statutory risks, including group life, employee compensation, and professional indemnity policies.
• Environmental and social impact: Verification of compliance with environmental regulations, impact assessments, community engagement obligations.
• Litigation and dispute resolution: Ongoing disputes, arbitration proceedings, administrative proceedings or regulatory enforcement proceedings that may crystallise into post-closing liabilities.
• Anti-corruption and AML: Review of anti-bribery compliance frameworks, exposure to investigations, and alignment with both local and international AML standards.

Vendor due diligence (VDD) is a common feature for PE in Nigeria. This typically serves as a housekeeping activity for the seller in preparation for the proposed sale. It is particularly for competitive and larger deals where sellers seek to expedite the sale process and maximise valuations. VDD is especially common in sectors such as financial services, telecommunications, oil and gas, and technology, characterised by high regulatory complexity and the need for specific legal expertise, making VDD reports valuable to potential buyers.

Typical Reports and Documents Provided

Sell-side legal advisers in Nigerian auction sales would typically provide documentation with respect to the target’s corporate identity, statutory books, material contracts, assets, documents evidencing regulatory compliance, litigation involving the target or any such additional document requested by the buy side. In some cases, a comprehensive legal vendor due diligence report covering the key legal and regulatory aspects of the target business may also be provided for the buy side, where requested, although this is not common as bidders often prefer to conduct their independent legal due diligence.

Reliance on Vendor Due Diligence Reports

It is typical for the respective bidders in an auction sale to conduct their independent legal due diligence instead of relying on the seller’s vendor due diligence report. This is because comprehensive due diligence (including legal due diligence) is required for the purposes of valuation of the target company. That said, where requested by the bidder(s), sell-side advisers in Nigeria may provide limited reliance on vendor due diligence reports following international market practice of restricting liability exposure. Legal advisers generally structure their engagement letters and VDD reports to limit reliance to the immediate client (the seller), while providing prospective buyers with access to the information on a non-reliance basis to conduct their own due diligence exercise. This approach protects the legal advisers from potential claims by unsuccessful bidders or subsequent disputes regarding the accuracy of information provided.

While uncommon in M&A/PE auction sales in Nigeria, some sellers may negotiate limited reliance letters with their advisers to enhance the credibility of the VDD package and make their process more attractive to bidders. Such reliance arrangements are typically subject to significant limitations, including caps on liability, time limitations, and exclusions for certain types of losses.

PE acquisitions in Nigeria are predominantly structured as private treaty sale and purchase agreements, negotiated directly between the PE fund (or its acquisition vehicle) and the selling shareholder(s). This structure offers maximum contractual flexibility, confidentiality, and execution speed, and allows the parties to tailor terms such as conditions precedent, warranties and indemnities, consideration mechanisms, and post-closing governance arrangements.

Mergers and court-approved schemes of arrangement are occasionally employed, but largely for corporate restructurings, consolidations, or downstream reorganisations within portfolio groups rather than for typical PE acquisitions. These methods tend to be more time-consuming and less attractive for funds seeking defined exit timelines, given the judicial and regulatory approvals required under applicable law.

Tender offers and other public acquisition mechanisms remain rare in the PE space, as the majority of Nigerian targets are closely held private companies rather than publicly traded entities. Public-to-private transactions occur infrequently, and are generally confined to strategic investors rather than financial sponsors.

While the core contractual framework of acquisitions remains consistent, the transaction dynamics differ between privately negotiated sales and auction processes. In bilateral transactions, the buyer typically conducts extensive due diligence and negotiates detailed protections (including warranties, indemnities, and completion adjustments). In auction sales, deal terms are often more seller friendly, with limited warranty coverage and shorter exclusivity windows.

In practice, the choice of structure is driven by the target’s ownership profile, sectoral regulatory environment, deal size, due diligence outcomes/findings and timing pressures.

PE-backed buyers in Nigeria are typically structured through special purpose vehicles (SPVs) incorporated either as Nigerian companies or offshore entities, depending on the transaction structure, tax optimisation strategy, and exit considerations.

The PE fund itself rarely acts as the direct contracting entity in the acquisition process itself. Instead, the fund establishes a layered acquisition structure whereby a BidCo is incorporated to serve as the immediate acquisition vehicle. This SPV executes transaction documentation such as the sale and purchase agreement, shareholders’ agreement and financing documents, and holds the target company’s equity post-closing. The fund provides equity financing to the SPV through shareholder loans or equity contributions, while the SPV may also raise debt financing for leveraged transactions. The fund’s role is typically limited to providing capital commitments (via equity or shareholder loans), approving key decisions, and nominating representatives to the BidCo or target’s board.

This SPV structure provides several advantages, including limited liability protection for the fund, operational flexibility, ring-fencing of liabilities, ensuring that the fund and its limited partners are insulated from target-level risks, simplified exit processes, and tax efficiency.

Nigerian PE transactions are typically financed through a blend of equity and debt, structured to balance risk, optimise returns, and enhance tax efficiency. The equity component is usually provided by the PE fund, backed by high net worth individuals and institutional investors, either directly or through its investment vehicle, while the debt portion may be sourced from local commercial banks,development finance institutions (DFIs), offshore lenders, or mezzanine financiers. In light of the recent amendments to the Investments and Securities Acts, 2025, which is aimed at strengthening Nigeria’s investment ecosystem, it is expected that more institutional investors – eg, pension funds, sovereign wealth funds, and other development finance institutions – will become significant contributors to the equity pool.

Equity commitment letters or equivalent undertakings are routinely used to ensure contractual certainty of funding. These instruments are typically issued by the PE fund to the acquisition SPV, or referenced directly in the acquisition documentation, confirming the fund’s binding obligation to provide the requisite equity financing once conditions precedent are fulfilled. Such letters serve as a key assurance to sellers and lenders that the buyer has credible and enforceable funding commitments. Other assurances also include a buyer guarantee where the PE fund provides a guarantee to the seller of the Bidco’s under the sale documentation.

For the debt-funded component, commitment letters or term sheets from lenders are often negotiated at signing, particularly in competitive or time-sensitive transactions. Where full debt commitments are not available at signing, comfort may be provided through binding term sheets, preliminary offer letters, sponsor guarantees, or escrow arrangements, thereby mitigating financing risk between signing and completion. In some cases, shareholder loans are also employed as quasi-debt instruments to bridge funding gaps or facilitate faster closings.

It is true that financing markets have become more challenging with higher interest rates and tighter lending standards. Nigerian banks and financial institutions have become more selective, requiring stronger covenant packages and higher equity contributions. This has led to increased use of development finance institutions, longer financing timelines, and more conservative debt-to-equity ratios in deal structures.

Consortium deals involving multiple PE sponsors are relatively uncommon in Nigeria, primarily occurring in large-scale transactions or complex regulated sector acquisitions where risk sharing and combined expertise are beneficial.

Co-investment alongside lead PE funds is increasingly common, particularly for larger deals. This allows funds to deploy more capital while providing additional investors with access to attractive opportunities.

Co-investors are predominantly existing limited partners of the lead fund (pension funds, insurance companies, development finance institutions) making direct investments alongside their fund commitments. External co-investors are less common but include other institutional investors and family offices.

PE-corporate consortia are moderately common, especially in sectors requiring operational expertise or regulatory relationships. Examples include banking sector transactions where corporates provide industry knowledge and energy/oil and gas or other infrastructure deals where corporates contribute technical capabilities alongside PE financial structuring.

The consideration structure adopted is commercial in nature, shaped by negotiation dynamics, market practice, and the specific features of each transaction. While cash remains the predominant form of consideration, alternative forms are occasionally employed, particularly in transactions involving strategic investors or management participation.

Nigerian PE transactions predominantly adopt fixed price structures using the locked-box mechanism. Under this model, the purchase price is agreed at signing and determined by reference to a set of pre-signing accounts (the “locked-box date”), with economic risk and benefit passing to the buyer from that date. This approach offers transactional certainty, simplicity, and a “clean break” for sellers, and is particularly valued by PE funds seeking swift exits and predictable returns.

However, depending on the commercial agreement and the buyer’s leverage, completion account mechanisms where the purchase price is subject to post-closing adjustments based on actual working capital, net assets or other forms of adjustments remain common. This is typically used in transactions involving local businesses with less predictable financial reporting or where buyers seek to safeguard against balance sheet volatility. PE buyers often prefer completion accounts for precision and control over value leakage, while PE sellers typically push for locked-box arrangements to minimise post-closing disputes and ensure clear-cut exit timelines.

Completion accounts allow for working capital and net assets adjustments at completion. PE funds as buyers typically prefer completion account for accuracy and control. As sellers, PE funds often push for locked-box mechanisms with minimal post-completion adjustments to ensure deal certainty and clean exit.

Where fixed price locked-box mechanisms are adopted in Nigerian PE transactions, it is not typical for interest to accrue on the equity price from the locked-box date to completion unless expressly negotiated into the sale and purchase agreement.

Indemnity provisions are standard in respect of leakage. The locked-box concept rests on the assurance that no value “leaks” from the target to the seller or its affiliates between the locked-box date and completion, other than permitted leakages expressly agreed in the sale and purchase agreement (for example, salaries, arm’s-length trading payments, or agreed distributions). Any non-permitted leakage identified post-completion generally triggers a reimbursement obligation from the seller, typically on a naira-for-naira basis.

Interest may accrue on late payment in respect of any leakage where parties have expressly agreed to such interest payment.

PE transactions typically include a general dispute resolution mechanism governing every aspect of the deal and not simply the consideration structure. Most agreements include tiered dispute resolution: (i) good faith negotiations between parties; (ii) mediation, or, in some particularly large and international deals, expert resolution; and (iii) arbitration or court intervention only upon the failure of the aforementioned measures.

The level of conditionality is usually dependent on the nature and structure of the PE transaction. Nigerian PE transactions feature moderate to high conditionality beyond mandatory regulatory approvals. Common conditions include financing arrangements (given limited committed debt markets), third-party consents from key suppliers/customers, board/shareholder approvals, regulatory approvals and satisfactory due diligence completion on specific issues.

Material Adverse Change (MAC) provisions are standard clauses in a PE transaction documentation. These clauses are usually inserted to protect a buyer and prevent the target or seller from undertaking any act that would significantly impact the target’s financial or overall health. MAC clauses are usually heavily negotiated with significant carve-outs for general economic conditions, regulatory changes, and industry-wide events.

“Hell or high water” undertakings are uncommon in Nigerian PE transactions. Buyers typically accept regulatory risk only to the extent of pursuing approvals diligently and in good faith, rather than absolute commitments to obtain approval regardless of conditions imposed. This reflects the unpredictability of Nigerian regulatory processes and potential for onerous or deal-breaking conditions.

There is a practical distinction. For merger control in Nigeria, buyers more readily accept stronger undertakings as the process is relatively predictable, with clear thresholds and timelines. For foreign investment approvals (NIPC registration, sector-specific approvals), buyers typically limit commitments due to greater regulatory discretion and potential for policy changes affecting approval conditions.

The EU FSR regime does not feature in Nigerian PE transaction negotiations. Most deals are either purely domestic or involve Africa-focused assets. The EU FSR becomes relevant where a Nigerian fund participates in a co-investment involving EU-based investors or targets with significant EU operations – a relatively rare occurrence in the Nigerian market.

Break fees are common in Nigerian PE transactions, typically an agreed percentage of the deal value usually around 3% to 5% of the transaction value, although the precise figure depends on the size and complexity of the deal, as well as the perceived certainty of closing. Common triggers include: (i) buyer financing failure; (ii) material breach of representations, warranties or covenants by either of the parties; (iii) withdrawal or termination of the transaction without lawful cause; and (iv) misrepresentation or conduct that frustrates completion.

While there are no statutory caps under Nigerian law, the enforceability of break fees is governed by the common law penalty doctrine. Nigerian courts usually apply penalty doctrine principles in placing limits on break fees. In other words, the break fees must represent a genuine pre-estimate of expected loss but may reduce or invalidate amounts deemed to be punitive or excessive.

Reverse break fees are less common but are increasingly seen in larger or cross-border transactions, particularly where the buyer incurs significant due diligence and structuring costs in reliance on the seller’s undertakings or as a punitive measure against the seller for time and resources spent by the buyer prior to the seller’s arbitrary termination.

In Nigerian PE transactions, termination rights are typically negotiated to provide both parties with balanced protection in the event of deal failure. Either the buyer or seller may terminate the acquisition agreement under the following circumstances: material breaches of representations, warranties, or covenants by the counterparty that remains uncured within a specified remedy period, misrepresentations, failure to satisfy conditions precedent by longstop dates, material adverse change events, mutual agreement between the parties to discontinue the transaction or regulatory prohibitions, insolvency or petition for winding up of any of the parties.

Longstop dates are typically a matter of contract and depend on the transaction’s complexity and regulatory requirements.

For domestic PE acquisitions, the longstop period usually ranges between three and six months from signing, while cross-border or multi-sector deals, particularly those requiring merger control and other sectoral approval – such as the Nigerian Upstream Petroleum Regulatory Commission’s (NUPRC)/ministerial approvals – an extended longstop date may be negotiated by the parties for a period ranging from six to 12 months to accommodate potential regulatory delays.

Nigerian PE transactions feature distinctly different risk allocation patterns compared to corporate deals, primarily due to the institutional nature and investment objectives of financial sponsors. The PE risk allocation model in Nigeria prioritises transactional certainty, liability limitation, as well as value preservation over relationship continuity contrasting with the more relational and strategic risk-sharing approach typical of corporate acquirers.

In PE-backed transactions, sellers (funds) typically seek a clean exit, and are therefore more resistant to open-ended post-closing liabilities. As a result, they often push for limited warranties and indemnities, shorter survival periods, and strict liability caps commonly tied to a small percentage of the purchase price or proceeds placed in escrow. By contrast, corporate sellers, especially those engaged in strategic divestments, tend to accept more extensive post-closing obligations or indemnities, often due to ongoing commercial relationships, reputational considerations, or long-term sector presence. Corporate buyers are also typically more willing to assume commercial risks, given their strategic integration objectives and deeper operational synergies with the target business.

On the buyer side, PE investors often adopt a more conservative stance, demanding robust warranties, indemnities, and pre-closing covenants, as well as broad termination and MAC protections, to safeguard returns and facilitate future exit options. PE investors also place a strong emphasis on regulatory, tax, and compliance risk mitigation, given the heightened scrutiny from their limited partners and co-investors.

PE sellers typically provide limited warranties covering title to shares, authority to sell, basic corporate matters and regulatory compliance. Tax indemnities usually cover pre-completion tax liabilities with carve-outs for disclosed items and normal course liabilities. Business warranties are heavily limited or excluded entirely.

Management typically provides separate warranties covering employment matters, key business relationships, and operational issues within their knowledge.

Where the buyer is PE-backed, warranty limitations are generally tighter, as both parties understand institutional constraints. PE sellers face stronger negotiation from sophisticated PE buyers demanding extensive warranty and indemnity obligations.

Data room disclosure against warranties is typically allowed as a general disclosure, with buyers deemed to have knowledge of disclosed information in the data room. However, specific disclosure must be clear, complete and accurate; general document dumps do not typically qualify as adequate disclosure.

Liability for warranties or indemnities is typically limited by knowledge qualifiers, known issues, disclosed issues, time/duration, an agreed cap, de minimis provisions, usually such that the seller will not be liable for an amount that exceeds the purchase price, no double recovery, recovery from third party, and so forth.

Nigerian PE deals include standard protections such as specific performance rights, breakup fees, interim period covenants, change-of-control clauses, non-compete covenants from sellers and management, key person retention agreements, warranties, extensive representations and regulatory compliance provisions. Data-room disclosure limitations and specific disclosure requirements are also common.

Warranty and indemnity insurance is not commonly used in mainstream M&A or PE transactions in Nigeria, save for certain cross-border transactions, as the regulatory framework in the country does not provide adequate tools to support it.

Escrow arrangements to back up obligations are also very standard clauses, particularly where the seller seeks a deposit of a portion of the purchase price upfront, or the buyer requires retention of a portion of the purchase price to settle any outstanding seller obligations, breach of warranties or contingent liabilities, such as tax or pending litigation against the target.

Litigation in connection with PE transactions in Nigeria is relatively uncommon compared to developed markets, primarily due to the preference for alternative dispute resolution mechanisms and the commercial relationship-driven nature of Nigerian business culture. Most disputes are resolved through negotiation, mediation, or arbitration rather than formal court proceedings. Where disputes do arise, they often relate to post-closing adjustments, earn-out mechanics, and breaches of warranties and indemnities.

Public-to-private PE transactions involving PE-backed bidders are relatively uncommon in Nigeria, but remain legally permissible and commercially feasible under the CAMA and the ISA. Such transactions are generally executed through takeover bids regulated by the SEC, following the procedures set out in the SEC Rules on Takeovers and Mergers.

The conversion of a public company into a private enterprise requires shareholder approval by special resolution, SEC sanction, and compliance with applicable listing rules where the target is publicly quoted. PE sponsors may pursue such structures to achieve greater operational flexibility, implement strategic restructuring, or facilitate exit planning without the ongoing disclosure obligations of a listed entity.

The role of the target company and its board will typically include:

• acting in good faith with respect to the shareholders;
• providing all necessary corporate documentation required for the process promptly;
• duty of care and skill;
• making the necessary and applicable disclosures; and
• ensuring compliance with regulatory authorities.

At the bid stage, transaction documentation typically includes term sheets, process letters, confidentiality and non-disclosure agreements, and, where appropriate, a memorandum of understanding outlining key commercial terms.

“Relationship agreements” between the bidder and the target are not common in Nigerian practice, though bespoke arrangements may occasionally be negotiated to govern interim management conduct, information sharing, or post-acquisition transition.

Any transaction that brings beneficial ownership of shares in a company to 5% or more must be disclosed to the SEC. Additionally, by sections 119 and 120 of CAMA, persons with significant control, ie, holding at least 5%, are required to notify the CAC of such fact.

For PE-backed bidders contemplating tender offers in Nigeria, key disclosure obligations include:

• beneficial ownership disclosure;
• financing arrangement disclosure revealing funding sources, debt facilities, and financing conditions, which can be sensitive for leveraged PE structures;
• foreign investment notifications to NIPC for non-Nigerian PE entities;
• merger notification filings, subject to meeting the criteria; and
• relevant sector-specific regulatory pre-clearance requirements above stipulated thresholds.

Nigeria has a 30% mandatory offer threshold under the Investments and Securities Act 2025 and SEC Rules. Accordingly, where a person (acting alone or in concert with other persons) acquires 30% or more of the voting rights in a public company, such person(s) must make a tender offer to the shareholders of the company.

On application to the SEC, an investor may be exempted from making a takeover bid in the above context, the exceptions being where: (i) there are less than 20 shareholders representing 60% of the members of the target company; (ii) the shares to be acquired under the bid are shares in a private company, except where the private company within the immediate preceding 12 months converted from a public quoted company to a private company; (iii) an ailing company undertakes a private placement approved by the SEC which results in the strategic investor acquiring more than 30% of the voting rights of the company; (iv) the effect of the acquisition was disclosed to the acquirer in a prospectus published during an initial public offer; (vi) there is a conversion of convertible securities approved by the shareholders of the target company; (vii) an individual or entity holds shares holds more than 50% of the outstanding votes; or (viii) shareholders holding at least 50% of the outstanding votes indicate in writing their intention not to accept the takeover bid.

Cash is predominantly used as consideration in Nigerian tender offers, reflecting the preference of public company shareholders for liquidity. However, Nigerian law also recognises non-cash as a form of consideration for the acquisition of shares in a public company. Parties are thus at liberty to agree on the form of consideration. That said, it is important to note that where non-cash considerations are adopted in paying for the shares of public company, the company must engage the services of an independent valuer to value and appraise that the value of the non-cash consideration is equivalent to the value of the shares.

Generally, Nigeria does not have a single statutory minimum price formula. The tender offer to shareholders must, however, be fair and not lower than the recent acquisition price triggering the tender offer. By convention, the offer price is typically not lower than the highest trading price in respect of the company’s shares in the six months preceding the tender offer.

Common conditions include regulatory approval conditions, no material adverse change clauses, and satisfaction of due diligence conditions.

Tender offers can indeed be conditional on the bidder obtaining financing, subject to regulatory clearance from the SEC.

Nigeria’s regulations provide limited deal security options compared to the mature markets; however, contractual provisions such as break fees and escrow amounts are the most predominant deal security measures. Other provisions include non-compete provisions, sponsor guarantee, and matching rights.

PE bidders can seek board representation rights, veto powers over major decisions, and manage appointment rights through shareholder agreements. PE bidders can also negotiate reserved matters for which a high shareholding threshold will be required for approval, ensuring that the majority shareholder does not have unilateral power to decide such matters. These rights are typically negotiated with existing shareholders and may trigger merger notification approval, even in minority acquisitions where the investors exercises veto rights over key decisions of the target.

Debt push-down is not a very popular concept under Nigerian law, particularly in view of the general financial assistance restriction contained in CAMA prohibiting a company from rendering assistance for the acquisition of its shares. Thus, there is no specific statutory threshold for debt push-down into Nigerian targets. However, practical requirements for such to occur will typically include sufficient shareholders’ consensus.

Squeeze-out mechanisms: under Nigerian law, where the successful offer results in the PE bidder acquiring 90% or more of the total shares of the target, such shareholders can compulsorily “squeeze out” the minority shareholders under a scheme of arrangement pursuant to sections 712 and 713 of CAMA.

It is typical to have key shareholders commit to voting in favour of the acquisition in Nigeria, subject to regulatory approvals. This is typically included in the sale documentation. However, the obtention of irrevocable commitments is not common practice in Nigeria.

Management equity incentivisation is very common in Nigerian PE transactions. It serves as a key retention and alignment tool, which is particularly important given Nigeria’s competitive talent market and the relationship-driven nature of local businesses.

The level of equity ownership granted to management typically varies depending on factors such as the size and stage of the company, the extent of the management team’s contribution to enterprise value, and the strategic objectives of the PE fund. While there is no fixed standard, management equity stakes in Nigerian PE-backed companies generally range between 5% and 20% of the company’s share capital. Senior executives and founders tend to hold larger proportions within this range, often subject to vesting schedules and leaver provisions designed to incentivise long-term commitment and performance.

Management participation in Nigerian PE transactions typically combines features of both institutional and sweet equity structures. Management often co-invests alongside the PR fund, usually through subscription to ordinary shares and occasionally preference shares in the holding company. While classic sweet equity arrangements with complex rachets and waterfall returns are less common than in mature markets, management may still receive a minority equity stake at a favourable entry price to align incentives and reward.

Vesting provisions for management equity are relatively common in Nigerian PE transactions, though the structure is typically a matter of commercial negotiation between the management team and the investors. Such provisions are primarily designed to align management incentives with long-term value creation and to ensure retention through the investment period.

Good-leaver provisions for management shareholders which aim to protect exits by such management shareholders typically include provisions with respect to those departing due to death, disability, retirement, dismissal without cause, or constructive dismissal, typically retain their vested shares at fair value or carry value and may benefit from accelerated vesting of unvested shares with rights to participate in exit proceeds on a pro rata basis.

Bad leavers, generally including resignation, dismissal for cause, or breach of restrictive covenants, face forfeiture of unvested shares and compulsory transfer of vested shares at the lower of cost or fair value, with exclusion from exit proceeds or profit participation.

Management shareholders in Nigerian PE transactions typically agree to comprehensive restrictive covenants including non-compete provisions preventing them from engaging in competing businesses for 12 to 24 months after departure, non-solicitation undertakings prohibiting recruitment of key employees or customers for similar periods, and non-disparagement clauses requiring them to refrain from making negative statements about the company or PE sponsor. These restrictions are, however, subject to the Federal Competition and Consumer Protection Act 2018 which prohibits restrictive agreements and covenants.

Additional covenants often include confidentiality obligations extending indefinitely, non-interference provisions preventing disruption of business relationships, and intellectual property assignment clauses ensuring all work-related innovations belong to the company. Nigerian courts generally enforce restrictive covenants that are reasonable in scope, duration, and geographic limitation, applying the doctrine of restraint of trade, which requires covenants to protect legitimate business interests without unreasonably restricting individual liberty.

These restrictive covenants are typically incorporated into both the shareholders’ agreement governing equity participation and the employment contract.

Management shareholders in Nigerian PE transactions typically receive limited minority protection mechanisms given their junior position in the capital structure and the controlling nature of PE investments. Basic protections include information rights, providing access to monthly financial statements and board materials, tag-along rights allowing participation in any PE fund share sales, and anti-dilution protection against equity issuances below fair value. Although this protection is usually limited to maintain financing flexibility for growth capital needs.

PE funds in Nigeria typically exercise substantial control over portfolio companies through comprehensive governance mechanisms that ensure strategic oversight and value creation alignment. Board appointment rights in PE transactions are usually proportionate to the level of shareholding being acquired, with PE typically controlling the chairman role and other key committee positions, such as audit and remuneration committees.

Reserved matters requiring PE fund shareholder approval typically cover a broad scope of strategic and operational decisions including annual budgets and business plans, capital expenditures above specified thresholds, issuance of new shares, acquisitions or disposals exceeding defined limits, material contracts or commitments, changes to senior management compensation or incentive schemes, debt financing arrangements, dividend distributions, and any fundamental changes to business strategy or corporate structure.

Additional reserved matters commonly include decisions regarding new business lines, joint ventures or partnerships, material litigation settlements, changes to auditors or key professional service providers, and any transactions with related parties or shareholders.

Under Nigerian law, a PE fund and its portfolio company are ordinarily regarded as distinct legal entities, each possessing a separate legal personality. Consequently, the liabilities or obligations of a portfolio company do not typically extend to the PE fund or its investors. However, there are limited circumstances in which a PE fund may be held liable for the actions of its portfolio company.

Such liability most commonly arises through the principle of piercing (or lifting) the corporate veil, statutory liability provisions, or regulatory enforcement mechanisms. Nigerian courts are generally reluctant to disregard the corporate veil, but will do so where it is established that the fund exercises such pervasive control over the portfolio company that the latter functions merely as its alter ego or agent. Courts are more likely to pierce the corporate veil in cases involving fraud or improper transactions, deliberate undercapitalisation, abuse of corporate status, or commingling of assets between the fund and the portfolio company.

In addition, certain statutes impose direct liability on directors, shareholders, or officers for specific breaches, particularly where the individual or entity is shown to have consented to, connived in, or neglected to prevent the wrongdoing. Regulators in sensitive sectors such as banking, insurance, and oil and gas may, depending on the extent of infraction, also hold controlling shareholders or beneficial owners accountable for misconduct, financial mismanagement, or non-compliance with statutory obligations.

PE exits in Nigeria over the past 12 months have predominantly involved trade sales to corporate buyers and secondary sales to other PE funds.

However, occasionally, management buyouts have been observed as a form of exit, particularly where existing management teams have secured third-party financing. This is nevertheless an uncommon exit option.

Dual-track exits combining an IPO together with sale processes are relatively rare in Nigeria. Similarly, triple-track exit processes including recapitalisation options are also uncommon in the Nigerian market.

PE sellers in Nigeria rarely reinvest upon exit, as most funds operate strict investment periods and fundraising cycles that require complete portfolio realisation to return capital to limited partners.

Drag-along and tag-along rights are standard features in Nigerian PE and shareholder arrangements. They are routinely included in shareholders’ agreements to facilitate exit planning and ensure fair treatment of minority shareholders. In practice, these rights are actively used. Drag-along rights allow majority shareholders to compel minority shareholders to sell their shares alongside a majority sale, ensuring a clean exit for a buyer. Conversely, tag-along rights protect minority shareholders by allowing them to participate in any sale by the majority on the same terms, thereby preventing them from being left with an unwanted or unfamiliar co-shareholder.

Notably, the CAMA indirectly supports the concept of tag-along rights by prohibiting a member or group of members acting together from selling more than 50% of a company’s shares to a non-member unless that non-member offers to purchase all existing shareholders’ interests on the same terms.

The threshold for triggering drag-along or tag-along rights is primarily a contractual matter, negotiated among shareholders. In practice, a 50% disposal threshold is common in Nigerian transactions.

The negotiation dynamics often differ between management shareholders and institutional investors. Institutional PE investors who usually have defined investment horizons and clear exit strategies tend to negotiate stronger and more definitive drag and tag provisions to ensure exit flexibility and to avoid minority holdouts. Management shareholders, on the other hand, typically seek to limit drag rights or raise thresholds to protect their continued participation in the company post-investment.

On an exit by way of an IPO, although uncommon, PE sellers in Nigeria are typically subject to lock-up restrictions that prevent immediate disposal of their shares following listing. The precise terms are negotiated with the issuer and underwriters, but they are also governed by the rules of the Nigerian Exchange Limited (NGX).

Under the NGX Rulebook, 2015, promoters and directors of companies undertaking an IPO and listing on any NGX board are required to retain at least 50% of their shareholding for a minimum period of 12 months from the date of listing. During this period, such shares cannot be sold, transferred, or otherwise disposed of, directly or indirectly, except where the NGX grants a waiver. Accordingly, PE sellers must comply with this mandatory lock-up requirement in addition to any contractual restrictions agreed in the underwriting or subscription agreements.

As highlighted above, “relationship agreements” between the PE seller and the issuer are uncommon in Nigeria. Instead, the relationship is typically governed through standard shareholder arrangements and regulatory disclosures required by the NGX and the SEC.