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DealHQ Partners
In Business, Capital Markets, CBN, commercial, Finance, Newsletters, Regulation & Policy

HOW THE INVESTMENT AND SECURITIES ACT 2025 WILL CHANGE THE TRAJECTORY OF CAPITAL AGGREGATION IN NIGERIA

INTRODUCTION  

The Investment and Securities Act, 2025 (“New ISA” or the Act) marks a significant milestone in the evolution of Nigeria’s capital market regulation. The Act was signed into law in March 2025 by President Bola Ahmed Tinubu. It repeals the 2007 Act, which had steered the Nigerian capital market for nearly two decades.

Since 2007, there is no doubt that the global capital market landscape has evolved considerably, largely driven by technological innovation, changes in international financial trajectories, the emergence of new asset classes, shifts in the global energy and commodities markets, and prioritization of sustainability and climate action by sovereigns, sub-sovereigns, and major corporations.

The new ISA seeks to align our capital market regulation with international best practices whilst appropriating broader powers to the Securities and Exchange Commission (SEC) for firmer market oversight, steeper penalties for infractions, and a more creative regulatory regime geared towards promotion of investor confidence. The ISA 2025 also introduces sweeping reforms aimed at enhancing market integrity, transparency, and financial inclusion. It provides a holistic framework for the regulation of market infrastructure and commodity exchange.

This article provides a concise regulatory update on the ISA 2025, highlighting the key reforms introduced by the legislation and their implications for market participants, regulators, and investors.

KEY REFORMS INTRODUCED BY THE ISA 2025

  1. Enhanced powers of the Commission

The Securities and Exchange Commission has been a signatory to the International Organization of Securities Commissions (IOSCO) MoU since 8th June 2006. The IOSCO is a global body that sets standards for securities regulation, and one of its core principles is that securities regulations should be operationally independent from pressures that undermine their autonomy.

In line with this, the ISA has expanded the Commission’s powers to emphasize independence in line with IOSCO standards. This signals a shift in reform that prioritizes transparency, accountability, and investor confidence.

  1. Prohibition of Ponzi and Unregistered Schemes

One of the critical reforms introduced by the Act is the express prohibition of Ponzi schemes and other unregistered schemes. The Act provides that the SEC shall prevent and sanction unauthorized and illegal dealings in securities and investment schemes.

The Act empowers the SEC to investigate, prosecute, and shut down operators of such schemes, with significant penalties prescribed for offenders, including fines, asset forfeiture, and imprisonment. It also empowers the commission to enter and seal up all prohibited schemes and obtain an order from the Tribunal or Court to freeze and forfeit all assets of such schemes to the Federal Government. Additionally, any costs incurred by the SEC shall be charged from the funds of the illegal schemes as well as the assets of such owners or managers of the scheme.

The Act also prescribes a fine of not less than NGN20,000,000 or imprisonment for a term of 10 years for offenders.

This reform is a direct response to the surge in fraudulent investment platforms in recent years. By setting out express provisions prohibiting unauthorized and illegal investment schemes, and enhancing enforcement powers of the SEC, the Act seeks to protect investors, restore confidence in the financial system, and promote only legitimate, SEC-registered investment activities.

  1. Categorization of Securities Exchanges

The Act has introduced a new section, which provides a dual classification for securities exchange (composite and non-composite exchanges); hence, ushering a structural shift in Nigeria’s capital market.

This new provision aligns with global trends where exchanges are classified according to their product offerings. A composite securities exchange permits the listing and quotation of all types of securities and commodities on the platform while the non-composite exchange allows for either a mono securities exchange which specializes in listing a particular or singular security, commodity or product or an alternative trading system which provides trading systems that connect buyers or sellers either in a physical location or on the internet.

  1. Commodity exchange

The Act introduces clearer and more robust provisions for the regulation of commodities exchanges in Nigeria. This reform reflects the growing importance of the commodities market in Nigeria’s economy and the need to promote transparency, investor confidence, and orderly market conduct.

The Act formally recognizes commodities exchanges as licensed market institutions and places them under the regulatory oversight of the Securities and Exchange Commission (SEC). The Act expands the SEC’s powers to regulate not just the exchanges themselves, but also key market participants such as commodity brokers, dealers, and clearing entities. It also promotes the standardization of contracts and trading practices, encouraging greater transparency and efficiency in commodities trading.

The implication of these provisions is a more structured and transparent commodities market that supports investor confidence, reduces market manipulation, and enhances price discovery. It lays the foundation for deeper market participation, the growth of structured commodities trading, and the development of critical infrastructure such as warehouse receipt systems.

  1. Warehousing receipts

A warehouse receipt is an electronic receipt of title to a specific commodity of a certain quality and quantity stored in a registered and named warehouse. The Act mandates the registration of warehouse receipts and warehouse operators, provided they meet the suitability and compliance conditions. Operating a warehouse without registration attracts imprisonment of at least 5 years or a fine of at least NGN3,000,000 or both. Section 242 of the Act further requires registered warehouse operators to insure their structures, facilities, and stored commodities.

The Act also provides for a collateral management company, which is a company that is registered by the commission to manage commodities as collateral.

The formalization of commodity exchanges, warehousing receipts, and collateral management company is expected to boost Nigeria’s agricultural sector by providing better price discovery and modernizing Nigeria’s commodity trading ecosystem. This will further integrate it into the broader capital market framework and diversify investment into physical goods and products.

  1. Insolvency in financial market infrastructure and market contracts

The Act addresses the insolvency of financial market infrastructures (FMIs) in a way that ensures the continued stability and reliability of the capital markets. This is especially crucial because FMIs play a central role in facilitating transactions, clearing, and settlement of trades, and ensuring market liquidity.

By the Interpretation of the Act, Financial Market Infrastructure is any entity set up to carry out centralized, multilateral payment, clearing, settlement, storage or recording activities, or providing a platform for trading securities and it includes systematically important payment systems, trade repositories securities exchanges, central counterparts, central clearing houses, central securities depositories and securities settlements systems.

Under the ISA 2025, the general insolvency regime applicable under other laws (such as the Companies and Allied Matters Act or the Bankruptcy Act) will not automatically apply to transactions facilitated under FMIs in the event of insolvency. Instead, the specialized insolvency framework ensures that trading activities and market contracts remain uncompromised due to the insolvency of the FMIs.

By exempting market contracts from standard insolvency proceedings, the Act prevents disruptions to trading, clearing, settlement, and collateral transfer processes that could otherwise cascade throughout the financial system. This protection maintains market liquidity and functionality significantly enhancing the resilience of Nigeria’s capital markets during periods of stress.

The general insolvency laws, which focus on the winding-up and liquidation of companies, would typically apply to the broader corporate sector, but FMIs, due to their systemic importance, are treated differently. This ensures that any insolvency event does not cause broader disruptions in the financial system.

Moreover, the establishment of this separate framework is intended to ensure that FMIs, which often handle complex financial instruments and settlements, can continue their operations in a manner that protects both market integrity and investor interests.

  1. Recognition of digital and virtual assets

The Act marks a transformative moment in Nigeria’s financial landscape by formally recognizing digital and virtual assets, such as cryptocurrencies, and tokenized investment contracts as securities. This provision transforms a previous ambiguous regulatory space into a clearly defined and structured market, where digital tokens, cryptocurrencies, and other blockchain-based instruments are now legitimate financial products. In the light of this provision, the Securities and Exchange Commission (SEC) is now the primary regulatory authority, tasked with overseeing Virtual Asset Exchanges (VAEs), Virtual Asset Service Providers (VASPs), Digital Asset Operators (DAOPs), and all operators within this sector.

Virtual assets are defined as digital representations of value that can be transferred, traded, or used for payment electronically. These assets exist solely in virtual form and include cryptocurrencies like Bitcoin, Ethereum, and other blockchain-based tokens.

Prior to ISA 2025, digital and virtual assets operated under a prohibitive stance without clear operational guidelines. This created a situation where investors were exposed to significant uncertainties that diminished their confidence in the market and hindered the growth of the sector. Despite the clampdown, Nigeria remains one of Africa’s largest crypto markets, ranking 8th globally, with nearly 6% of Nigerians holding crypto assets.

The Act mandates VAEs, VASPs and DAOs to adhere to SEC regulations aimed at transparency, investor protection, and accountability. Additionally, entities in sector must comply with anti-money laundering (AML), counter-terrorism financing (CFT), and proliferation financing (PF) regulations. They must implement stringent compliance measures, including customer due diligence, screening client records, and reporting suspicious transactions to relevant authorities.

This innovation sends a strong signal to international investors and the global business community that Nigeria is committed to fostering a safe and innovative financial environment for foreign investment, especially at a time when the adoption of digital technologies is reshaping economic landscapes worldwide. The ISA 2025’s emphasis on transparency and accountability reflects a broader strategy to create a balanced ecosystem that supports both the growth of fintech innovation and the enforcement of critical security measures

  1. Regulation and registration of securities

The Act now provides for approval of offshore or overseas securities offerings. This subsection provides that any public company or issuer intending to issue, offer, or list securities outside Nigeria must seek the prior approval of the commission and report the same to a securities exchange registered with the SEC.

This provision was introduced to enhance regulatory oversight over Nigerian entities engaging in offshore capital market activities. By requiring prior approval and reporting, the SEC can monitor cross-border capital market transactions, ensuring compliance with Nigerian laws and protecting investor interests.

The Act also increases the penalty regime to a fine of not less than NGN5,000,000 in addition to the alternative term of imprisonment for 3 years for any person who issues, transfers, sells, or offers securities to the public without prior registration. Alternatively, the SEC, in lieu of prosecution, may impose the above penalty sum and a further sum of not less than NGN20,000 for every day the violation continues.

  1. Capital raising exercise

The Act introduces new categories of Issuers to include:

  1. Public companies whose securities have been registered with the Commission;
  2. CBN-licensed institutions that are empowered to accept deposits and savings;
  3. Collective investment schemes;
  4. Government agencies, including supranational bodies or any other entity approved by the commission; or
  5. Free trade zone entities whose capital raising exercises have been approved by the commission.

This provision was introduced to broaden the scope of entities eligible to issue securities and raise capital in Nigeria. By expanding the categories of issuers, the Act aims to foster a more inclusive and diverse capital market, enabling a wider range of institutions, including non-corporate bodies, to participate in the securities market.

  1. Regulation of Derivatives

The Act introduces a more comprehensive and structured framework for the regulation of derivatives in Nigeria. The Act explicitly recognizes derivatives as financial instruments and brings their issuance, trading, and clearing under the regulatory oversight of the SEC.

The Act gives the SEC regulatory oversight concerning derivatives, derivatives markets or business, derivatives exchanges, derivatives market infrastructure, derivatives business operators, trade associations of derivatives business operators, and preventing unfair derivatives trading practices.

  1. Collective investment schemes

Under the Act, the definition of a Collective Investment Scheme has been expanded to include a close-ended investment scheme. This expands the types of collective investment schemes that can be administered in the Nigerian Capital Market.

With the new provision, which amends section 171 of the ISA 2007, modifications and additions have been made to expand the asset classes in which the funds for a scheme could be invested.

Furthermore, by this amendment, specialized or alternative schemes and collective investment schemes are to be treated as pass-through vehicles for taxation, which means that the income of the scheme is not taxed directly; instead, the investors pay taxes on the profits or losses they receive from the scheme.

CONCLUSION

The Investment and Securities Act 2025 represents a significant advancement in Nigeria’s capital market regulatory framework, introducing comprehensive reforms that enhance market resilience, foster innovation, and align the country’s securities regulation with global best practices. The legislation substantially expands the SEC’s regulatory powers, creating stronger protection for investors while establishing the legal foundations for emerging asset classes and trading mechanisms, and in turn making it on par with other markets.

The provisions introduced under the Investment and Securities Act 2025 represent a significant step toward modernizing and regulating Nigeria’s capital market. By addressing issues such as Ponzi schemes, financial market infrastructure, digital assets, and commodity exchanges, the Act ensures a resilient market, faster innovation, and also promotes competition within the local and foreign markets. The introduction of stricter rules on securities, collective investment schemes, insolvency, and systemic risk management will foster confidence in the Nigerian capital market, attracting both local and foreign investors.

As market participants adapt to this new regulatory landscape, Nigeria’s capital markets are poised for significant growth and increased relevance in the global financial ecosystem, potentially establishing the country as a leading financial hub within Africa and beyond.

 

About DealHQ

We are a Pan-African transactional advisory firm dedicated to enabling businesses operate efficiently within Africa’s dynamic market. We provide stellar business solutions which help businesses navigate the unique challenges and opportunities in the African business landscape whilst enabling them to operate efficiently within their market sphere.

Our service offering includes: corporate commercial, real estate & construction, finance, capital markets & derivatives, mergers and acquisitions, private equity, infrastructure, technovation and data privacy, agriculture & commodities, business formations & start up support amongst others.

The content of this Article is not intended to replace professional legal advice. It merely provides general information to the public on the subject matter. Should you wish to seek specialist legal advice on this or any other related subject, you may contact us.

info@dealhqpartners.com

www.dealhqpartners.com

+234 (0) 201 4536427 , +234 (0) 809 093 8104

 

Click here to access the pdf file

DealHQ Partners
In Business, Capital Markets, CBN, commercial, Finance, Newsletters, Regulation & Policy

UNDERSTANDING NIGERIA’S CPI AND GDP REBASING: IMPLICATIONS FOR BUSINESSES AND LEGAL CONSIDERATIONS

For the second time in its economic history, Nigeria embarked on a comprehensive GDP and CPI rebasing exercise. For context, the last rebasing exercise in Nigeria was conducted in 2014, updating the base year for GDP calculations to 2010, from 1990. The exercise resulted in a significant jump in the nation’s GDP, driving the outcome of a more accurate representation of the economy by incorporating previously underrepresented sectors such as telecommunications and entertainment.

According to the United Nations System of National Accounts (UN SNA)-2008, the base year for calculating a nation’ Gross Domestic Product needs to be revised periodically (usually every five years) to capture structural changes in the economy, new industries emerging, and shifts in consumption patterns. While it is undeniable that Nigeria was long overdue for a rebasing of its economic indicators; this step comes with significant implications for businesses, policymakers, and everyday Nigerians.

This article examines the implications of Nigeria’s CPI and GDP rebasing efforts for businesses, focusing on its impact on the pricing of goods and services, taxation, and key sectors such as agriculture, energy, and manufacturing. It also provides insights into how businesses can effectively navigate this transition.

  1. Understanding CPI Rebasing & GDP Rebasing

Consumer Price Index

A consumer price index (CPI) serves as a vital tool for understanding the economic health of any nation. Essentially, it provides a statistical estimate of goods and services procured for consumption by households in the Country. The calculation of the Consumer Price Index (CPI) involves identifying a representative selection of essential goods and services, commonly referred to as a “market basket.” The prices of these items are systematically monitored over time, and a weighted average is computed, taking into account the relative frequency of consumption for each item.

A revision of the Consumer Price Index (CPI) was concluded in February 2025 to accurately reflect evolving consumption patterns within the Nigerian economy.

YEAR CONDUCTED 2014 2024
ITEMS IN THE CPI BASKET 734 940
DIVISION 12 13

Key takeaways from the 2024 CPI rebasing.

This revision involved significant adjustments to the market basket, a key component used by statisticians to quantify inflation. Specifically, the number of items included in the basket was increased from 740 to 940, whilst the weighting of the basket goods and services were adjusted to reflect their current significance. Notably, sectors like fintech and healthcare, which were previously underrepresented, now hold a more substantial position within the basket. The rebasing has also introduced a new division “Insurance and Financial Services”, expanding the total number of divisions from 12 to 13, reflecting the importance of financial products in people’s lives. It has also resulted in the feature of supplementary indexes for services, energy and farm produce.

Gross Domestic Product

The Gross domestic product (GDP) refers to a monetary measure of the total market value of all the final goods and services produced in a specific period by a country,  used to measure the economic performance of a country or region. To rebase a country’s GDP is to update the base year used to calculate economic output to a more recent year. This will enable the GDP computation take into account structural changes that have occurred in the economy between the previously adopted base year and the most recently adopted base year to provide a more realistic representation of national economic performance.

Why Nigeria is Rebasing Its Gross Domestic Product (GDP)

Nigeria’s 2014 GDP rebasing exercise dramatically reshaped its economic standing, propelling it to become Africa’s largest economy –  surpassing South Africa, with an 89% surge to USD$509 billion. This transformation was not unexpected, as the previous base year had become increasingly obsolete, failing to capture the significant diversification of the Nigerian economy over 24 years.

Now, ten years later, Nigeria’s macroeconomic landscape has witnessed momentous shifts across various sectors. Stakeholders and policymakers agree that the rebasing of Nigeria’s CPI Index and GDP, is not only overdue, but has become critical, given the growing divergence between the base year’s economic data and the rapidly evolving realities of the Nigerian economy. To address this, the ongoing rebasing effort seeks to incorporate burgeoning sectors such as technology, digital services, NSITF (Nigeria Social Insurance Trust Fund), NHIS(National Health Insurance Scheme), Modular refineries and the informal economy, with a view to enhancing the reliability of Nigeria’s economic statistics. It is important to note that Nigeria’s current GDP rebasing exercise is still in progress. Therefore, stakeholders should be aware that any preliminary data or analysis may be subject to revision upon completion of the process.

YEAR CONDUCTED 2014 2025
BASE YEAR 2010 2019
GDP($000,000,000) 509 TBD
KEY SECTORS INRODUCED Telecommunications, IT, Nollywood Technology, Digital services, NSITF (Nigeria Social Insurance Trust Fund), NHIS (National Health Insurance Scheme) Modular refineries and the informal economy
POSITION IN AFRICA 1st TBD
POSITION IN THE WORLD 26th TBD

Recognizing the need for precision in both GDP and inflation tracking, the National Bureau of Statistics (NBS) has selected 2019 as the base year for the ongoing GDP rebasing. The selection of 2019 as the base year is due to its relative economic stability compared to the turbulent years that followed, which were significantly disrupted by the COVID-19 pandemic leading to global supply chain shocks, and fluctuating oil prices from which the world is only now recovering.

Whilst some schools of thought may view a GDP rebasing as a statistical facelift, in reality, it could be a blessing or a curse as it will illuminate both the growth and inherent challenges in the economic landscape. The rebasing exercise does not only adjust GDP figures, but also directly impacts key economic metrics expressed as proportions of GDP, such as fiscal deficits and debt-to-GDP ratios. Typically, a higher GDP, resulting from rebasing, lowers these ratios, presenting a more favourable fiscal outlook.

Beyond fiscal management, a rebased GDP also provides valuable support for development planning by highlighting growth trends across various sectors. These insights will prove invaluable for data-driven economic planning as it enables the Government allocate resources efficiently, target high-growth industries, and address economic gaps.

How Investors and Consumers should Interpret the rebased GDP & CPI

The rebased CPI and GDP figures present a nuanced landscape for investors. On the surface, the reported decline in inflation and an expanded GDP—driven by the inclusion of sectors like fin-tech, digital services, and formalized informal industries—may signal economic diversification and resilience. This could attract foreign investment, particularly in sectors newly reflected in the GDP, which now appear more prominent contributors to Nigeria’s economic output. A larger nominal GDP might also improve Nigeria’s debt-to-GDP ratios, potentially enhancing its creditworthiness.

However, the risks lie in the details. The GDP increase is partly a statistical recalibration which may not necessarily be backed by real growth in productivity or output. For instance, while the 2019 base year captures Nigeria’s post economic recovery, it may overemphasize Nigeria’s progress in addressing underlying structural challenges, such as infrastructure gaps or over-reliance on oil exports. Similarly, the post rebasing inflation rate shaped by updated consumption weights (e.g., reduced emphasis on volatile food prices), could mask ongoing cost pressures in utilities, transportation, or imported goods. Investors comparing pre- and post-rebased data without adjusting for methodological shifts may misallocate capital. In responding to the rebasing outcome therefore, investors would need to employ a holistic approach;  looking closely at other indicators like employment rates, currency stability, and consumer buying power to get a true sense of the economy’s health. This comprehensive approach helps avoid overestimating the positive impact of the statistical updates.

For consumers, the rebased CPI could flay a dangerous misconception that inflation has meaningfully slowed, and that prices of goods and services are stabilizing. The reported decline of food inflation to 24.48% might lead households to believe their purchasing power has improved, prompting increased spending or reduced savings. This decline, however, is largely a consequence of a re-weighted CPI basket which now assigns lower weight to staple foods like cassava or yam and higher weight to services like healthcare or streaming platforms. Prices for essential goods such as fuel, electricity, or imported rice may still be rising sharply, but their impact on the headline inflation rate is now de-emphasised.

Implication of GDP and CPI Rebasing on Pricing Strategies & Models

It is important for businesses and Investors to adjust their pricing models and strategies to align with the updated CPI basket which now emphasizes modern sectors like technology and services while reducing the weight of traditional industries such as agriculture. For example, businesses in the agricultural sector or particularly reliant on inputs (e.g., food processors) may find their rising costs underrepresented in the new CPI, as staples like cassava or maize now carry less statistical influence. On the other hand, tech firms offering digital services—now more prominently weighted—could leverage their heightened visibility in inflation metrics to justify price adjustments. This shift requires businesses to analyse their pricing strategy and structures through the lens of the revised CPI, potentially renegotiating supplier contracts or diversify supply chains to mitigate discrepancies between reported inflation and actual expenses to reflect the reported changes in consumer taste and behaviour.

Implication of GDP and CPI Rebasing on Tax Reforms

Nigeria’s 2014 GDP rebasing was a watershed moment, propelling the nation to the top of Africa’s economic rankings overnight. Yet, it revealed a glaring disconnect: while the economy looked larger on paper, its tax-to-GDP ratio remained one of the lowest in Africa.

Fast-forward to 2024, and policymakers are at a crossroads with the anticipated passage of the Tax Reforms Bill 2025. Take agriculture, the backbone of Nigeria’s economy which according to Statista, contributed 22.72% to GDP in 2023—a figure still anchored to the outdated 2010 base year. Yet, its tax contributions remain negligible, a paradox that underscores a systemic flaw. A rebased economy offers a clearer map of taxable activity, empowering policymakers to cast a wider net. Sectors like tech and financial services, now amplified by rebasing, offer a prime opportunity for the implementation of smarter taxation strategies.

 

  1. Sector-Specific Challenges
  • Agriculture, Energy, Manufacturing & Oil and Gas

For Nigeria’s farmers, manufacturers, and energy producers, rebasing feels like shifting sands beneath their feet. For example, manufacturers importing machinery may face a cruel irony: rising global costs clash with a CPI that underweights these expenses, leaving them stuck between raising prices, losing customers or assuming massive losses.

Agribusinesses who are already battling climate shocks and poor infrastructure, now risk being left in the cold. If the rebased CPI downplays food price volatility, government aid could dry up, and attention could shift to more prominent sectors of the economy.

  • Banking & Finance

The banking and financial sectors must re-assess lending rates, interest rates, and credit accessibility based on the rebased economic data. This could lead to adjustments in lending rates mortgage, personal and corporate loans

  • Retail and Consumer Goods

Adjustments in CPI weightings reflects reshaped consumer behaviour analytics, requiring businesses in retail to revisit demand forecasting models and consumer pricing strategies.

 

  1. Conclusion.

Nigeria’s comprehensive GDP and CPI rebasing exercise represents a pivotal moment in the nation’s economic history. While the statistical adjustments offer a more nuanced and contemporary view of the economy, they also necessitate a strategic recalibration for businesses, investors, and consumers alike. The shift in economic indicators, driven by the inclusion of emerging sectors and updated consumption patterns, demands a proactive approach to contract renegotiation, regulatory compliance, and financial planning as the impact extends beyond mere statistical adjustments, directly influencing pricing strategies and tax reforms.

For investors, the rebased figures present both opportunities and risks, requiring a holistic assessment that transcends surface-level data. Consumers, too, must remain vigilant, understanding that reported inflation figures may not fully reflect the lived reality of rising essential costs. The need for expert legal guidance becomes paramount in navigating the complex contractual and regulatory landscapes that emerge from these changes.

Ultimately, the successful adaptation to this economic recalibration hinges on a collective commitment to transparency, data-driven decision-making, and a thorough understanding of the evolving economic terrain. By embracing these changes, Nigeria can ensure that the rebasing exercise serves as a catalyst for sustainable economic growth and expansion.

 

About DealHQ

We are a Pan-African transactional advisory firm dedicated to enabling businesses operate efficiently within Africa’s dynamic market. We provide stellar business solutions which help businesses navigate the unique challenges and opportunities in the African business landscape whilst enabling them to operate efficiently within their market sphere.

Our service offering includes: corporate commercial, real estate & construction, finance, capital markets & derivatives, mergers and acquisitions, private equity, infrastructure, technovation and data privacy, agriculture & commodities, business formations & start up support amongst others.

The content of this Article is not intended to replace professional legal advice. It merely provides general information to the public on the subject matter. Should you wish to seek specialist legal advice on this or any other related subject, you may contact us.

info@dealhqpartners.com

www.dealhqpartners.com

+234 (0) 201 4536427 , +234 (0) 809 093 8104

 

Click here to access the pdf file

DealHQ Partners
In Business, Capital Markets, CBN, commercial, Finance, Newsletters, Regulation & Policy

UNDERSTANDING NIGERIA’S APPROPRIATION BILL 2025

The 2025 Budget, titled “The Restoration Budget: Securing Peace, Rebuilding Prosperity,” was presented by President Bola Ahmed Tinubu during a Joint Session of the National Assembly on Wednesday, December 18, 2024. To date, the budget is yet to receive legislative approval from the National Assembly, marking the latest start to the yearly legislative process for financial appropriation in 25 years. The Chairman of the Senate Committee on Appropriation, Senator Solomon Adeola, attributed the delay to the introduction of the Tax Reform Bill which is required to be passed concurrently with the Appropriation Bill 2025 and without which the underpinning revenue assumption will be doubtful. He further noted that the National Assembly is working diligently to pass the Appropriation Bill by January 31, 2025. In the interim, the National Assembly has approved an extension to the term of the 2024 Appropriation Act from December 31st 2024 to June 2025.

The 2025 Budget represents a significant step toward improving the overall health of the Nation’s economy, restoring macroeconomic stability, and building on the progress recorded by the current administration in the last nineteen months to give the Nigerian economy the much needed uplift.

In his Budget Proposal presentation,  President Bola Tinubu outlined the Federal Government’s key priority areas for the 2025 fiscal year, to include restructuring the economy, boosting human capital development, increasing trade and investment volumes, bolstering oil and gas production, and revitalizing the manufacturing sector to enhance Nigeria’s economic competitiveness. He emphasized that defense and internal security, infrastructure development, healthcare, education, human capital development, and agriculture remain at the core of his administration’s fiscal objectives.

The budget proposal is guided by the assumptions set out in the multi-year Medium Term Expenditure Framework (MTEF) 2025–2027 and the Fiscal Strategy Paper (FSP) which serve as a vital tool for prudent fiscal management and resource allocation. The MTEF incorporates factors such as inflation, interest rate, currency exchange rates, foreign exchange reserves, capital import flows, and the performance of the preceding year’s budget to establish the foundational assumptions influencing the fiscal plan for 2025.

Comparative Analysis of Key Budget Assumptions

  2025 2024 2023
Crude Oil Price (Per Barrel) $75 $77.96 $75
Crude Oil Production (MBPD) 2.06 1.78 1.69
GDP Growth Rate 4.6% 3.88% 3.75%
Inflation Rate 15% 21.4% 17.16%
Exchange Rate (USD 1) NGN 1500 NGN 800 NGN 435.57
 Table 1: Comparison of key assumptions underlying Nigerian budgets from 2023 to 2025

 

Fig 1: Key Assumptions in the 2025 budget

 

Key Elements of the Budget – Revenue summary

The 2025 Appropriation Bill projects a total revenue of NGN 36.35 Trillion, a 40.51% increase from the total aggregate revenue for 2024.

The total aggregate revenue of NGN36,352,202,174,299 for 2025 is therefore broken down as follows:

  1. FGN Share of Net Federation revenue is projected to be NGN 27.49 Trillion – (75.56% of the total aggregate expenditure).
  2. Independent Revenue is projected to be 3.47 Trillion representing – (9.51% of the total aggregate expenditure).
  3. Other Dividends (less NLNG Dividend) are projected to be NGN 7.52Billion – (0.02% of the total aggregate expenditure).
  4. Aids and Grants are projected to be NGN 761.9 Billion – (2.09% of the total aggregate expenditure).
  5. Special Funds/Account Receipts are projected to be NGN 300 Billion – (0.83% of the total aggregate expenditure).
  6. Revenue from Government-Owned Enterprises are projected to be NGN 2.87 Trillion – (7.89% of the total aggregate expenditure).
  7. Other Revenue Sources are projected to be NGN 1.46 Trillion – (4.02% of the total aggregate expenditure).

The Medium-Term Expenditure Framework (MTEF) 2025–2027 and Fiscal Strategy Paper (FSP) assumes a total revenue of NGN 34.82 Trillion for 2025:

  1. Oil-related sources: NGN 19.6 Trillion, representing 56.32% of the total projected revenue.
  2. Non-Oil-related sources: NGN 15.22 Trillion, representing 43.68% of the total projected revenue, which includes non-oil taxes, mining revenue, GOE revenue, aids, grants, and social fund receipts.

Whilst there exists a marginal discrepancy between the projected revenue in the 2025 Appropriation Bill (NGN 36.35 Trillion) and the MTEF/FSP assumption (NGN 34.82 Trillion), the negligible margin of difference suggests alignment in the fiscal posture of the Federal Government. The almost equal ratio of oil related revenue and non-oil related emphasizes the drive to achieve a more diversified revenue pool, particularly from taxes, government-owned enterprises, and social funds, reinforcing the government’s commitment to a sustainable fiscal mix.

Figure 2: percentage-based representation of revenue projection under the 2025 budget

Key Elements of the Budget – Expenditure Summary

The Appropriation Bill 2025 projects a total aggregate expenditure of NGN49.74 Trillion, reflecting a 41.91% increase in comparison 2024, including the approved supplementary budgets.

The projected expenditure for 2025, amounting to NGN49,740,165,355,396, is allocated as follows:

  1. Aggregate Capital Expenditure is estimated at NGN14.85 Trillion representing 29.85% of the total aggregate expenditure, and a 7.84% increase from the 2024 budget including the approved supplementary budgets.
  2. Recurrent (non-debt) expenditure is estimated at NGN14.12Trillion representing 28.39% of the total aggregate expenditure, and a 25.40% increase from the 2024 budget including the approved supplementary budgets.
  3. Total Debt service is estimated at NGN16.33Trillion, representing 32.83% of the total aggregate expenditure, and a 97.81% increase from the 2024 budget including the approved supplementary budgets.
  4. Statutory transfers are estimated at NGN4.44 Trillion, representing 8.93% of the total aggregate expenditure, and a 154.60% increase from the 2024 budget including the approved supplementary budgets.

Of the total aggregate expenditure approved for the 2025 financial year, a total of NGN8.2 trillion is appropriated for the service of domestic debts and NGN7.6 trillion for the service of foreign debts, while NGN 430.268 billion is to be held in a Sinking Fund Account for the retirement of maturing promissory notes.

 

 

Fig. 3: percentage based representation of revenue allocation under the 2025 budget

 

  2025 2024 2023
Aggregate Expenditure NGN49.74tn NGN28.7tn NGN21.83tn
Statutory transfers NGN4.44tn NGN1.743tn NGN967.49bn
Recurrent (non-debt) expenditure NGN14.12tn NGN8.769tn NGN8.33tn
Capital expenditure NGN14.85tn NGN9.995tn NGN6.46tn
Debt service NGN15.89tn NGN8.271tn NGN6.31tn
Sinking Fund NGN430.2bn NGN223.662bn NGN247.7bn
Table 2:  YOY Comparison of expenditure allocation in the budgets from 2023 – 2025

Key Elements of the Budget – Budget Deficit and Deficit Financing

The Budget deficit for the 2025 fiscal year stands at NGN13.39 trillion, representing 3.9% of our National GDP and a 45.36% increment from the NGN 9.18 trillion budget deficit for 2024. This sharp increase highlights the Federal Government’s strategic decision to expand fiscal spending in response to pressing national priorities. Although this exceeds the threshold set by the Fiscal Responsibility Act, the Federal Government has represented that the need to address critical security and economic challenges validates this increased expenditure. The Budget deficit is expected to be financed primarily from the proceeds of strategic asset sales/privatization which Federal Government estimates will return circa NGN312,332,810,711 (2% of total deficit); multilateral/bilateral project-tied loans disbursements estimated at NGN3,799,281,435,450 (28% of total deficit) and other debt financing sources estimated at NGN9,276,348,934,936 (69% of total deficit).

The Federal Government’s approach to deficit financing reflects an unprecedented strategy, relying on a domestic and external borrowing threshold. Whilst this strategy will likely facilitate economic growth and development across various sectors, it leaves in its trail growing concerns about rising National debt,  layered with rising cost of debt service which could further flay inflationary pressure.

Fig 4: percentage-based representation of the allocation of the budget deficit financing under the 2025 budget

Analysis of the 2025 Budget – Key highlights

  1. Macroeconomic assumptions

As with previous budgets, questions have been raised around the viability of the macroeconomic assumptions underpinning the 2025 Appropriation Bill. The USD exchange rate benchmark is set at NGN1,500/USD, whereas current market rate hovers around NGN1,535/USD. The gap between the projected and actual exchange rates signals a significant risk, especially if FX availability declines or the FX market conditions worsen. We note however that the Central Bank of Nigeria’s (CBN) Electronic Foreign Exchange Matching System (EFEMS), may likely improve transparency and efficiency in the FX market.

Furthermore, a review of the performance of the 2024 budget reveals discrepancies in inflation assumptions which was projected at 21% for 2024 and which later settled at 34.6%; oil production was pegged at 1.78mbpd, yet actual production averaged 1.4mbpd. These variances have raised significant concerns about the credibility of the 2025 assumptions, especially given persisting challenges such as oil theft, fluctuating global crude prices, and foreign exchange volatility. Critics argue that these overly optimistic assumptions could lead to higher deficits and greater borrowing to cover revenue shortfalls.

  1. Ambitious Revenue Assumptions

The revenue projections for 2025 have drawn significant scrutiny from experts, with the Federal Government projecting a total revenue of NGN36.35 trillion, representing a 40.51% increase from the 2024 budget revenue projection. This includes projected oil revenue of NGN19.6 trillion, a target that many consider overly optimistic, given Nigeria’s declining oil production volumes of circa 1.6mbpd over the past two years and the persistent challenges of pipeline vandalism, oil theft, and fluctuating crude prices. However, the recent approval of major oil and gas acquisitions, such as the Seplat-Mobil Petroleum Nigeria Unincorporated (MPNU), Oando-Eni, Chappal-Equinor, and Shell-Renaissance deals are expected to increase oil and gas production capacity. These deals, which bring in critical investments for the development of new oil fields and the revitalization of existing ones, are anticipated to help Nigeria achieve higher output levels, and possibly validate the production assumptions.

In the light of the record decline in consumer spending and the growing economic hardship, many stakeholders have also adjudged the Non-oil revenue projections as ambitious. The Federal Government expects NGN15.22 trillion from non-oil sources, including VAT and Corporate taxes. It is however worthy of note that the Federal Inland Revenue Service (FIRS) exceeded its 2024 revenue collection target, realizing NGN21.6 trillion over and above the NGN19.4 trillion target, including significant gains in Company Income Tax and Education Tax.

It is our considered opinion that achieving the 2025 revenue projections hinged primarily on increased oil and gas production, Stabilization of global oil prices and production costs fluctuations in oil prices could directly impact the revenue from this sector and Significantly improve the non-oil revenue stream.

  1. Debt Financing and Rising Debt Servicing Cost

Under the 2025 Budget, debt service is estimated at NGN16.33 trillion, accounting for 32.83% of total expenditure, significantly higher than the NGN8.49 trillion allocated in 2024. This increase reflects both the rising debt stock and the impact of global interest rate hikes on external borrowings. The fluctuating exchange rate, instability of the Nigerian Naira, and the rise in domestic lending rates further exacerbate the debt servicing burden, as more local currency may be required to meet both foreign and domestic debt obligations.

Nigeria’s growing debt burden continues to be of great concern to stakeholders. The 2025 Budget deficit of NGN13.39 trillion will be financed through a mix of borrowing, multilateral loans, and asset sales/privatization proceeds, further increasing the country’s debt stock. Debt-to-GDP ratio, which stood at 50.7% in 2024 is however projected to decrease marginally to 49% in 2025, highlighting concerns about long-term fiscal sustainability. The high debt-servicing costs will crowd out spending in vital sectors such as healthcare, education, and infrastructure, hindering efforts to achieve inclusive economic growth, thereby calling for an efficient long-term debt management strategy and enhanced fiscal discipline.

  1. The 2025 Tax Reform Bill

The proposed 2025 Tax Reform Bill, currently undergoing the legislative approval process, is what underpins key revenue assumptions under the 2025 Budget and the Federal Government’s strategy to increase revenue generation and improve fiscal sustainability. This Bill which has been applauded by many stakeholders, shows a much longer term approach to tax reforms in contrast to the previous Buhari administration, which passed a Finance Bill alongside its Appropriation Laws to deliver strategic reforms and stimulate economic activity in priority sectors in each Fiscal Year. The Tax Reform Bill when passed, is expected to enhance tax compliance, streamline fiscal policies, expand the national tax base, and consolidate existing tax laws, whilst delivering long-term fiscal health, and addressing systemic inefficiencies in tax administration and aligning tax policies to the broader fiscal objectives of the Federal Government.

Conclusion

The 2025 Appropriation Bill is an ambitious fiscal proposal designed to restructure critical sectors of Nigeria’s economy, drive revenue growth, and tackle pressing national challenges. Its key objectives include reducing dependence on petroleum imports, promoting the export of finished petroleum products, boosting agricultural production through improved security, and increasing foreign exchange inflows through foreign investments. Further, the budget targets a significant increase in crude oil output and exports while aiming to lower upstream oil and gas production costs. However, the ongoing delay in the budget’s approval by the National Assembly poses the risk of potentially stalling progress on these vital initiatives and delaying the execution of key projects.

Achieving the objectives of the 2025 budget will require a comprehensive and strategic approach by the Federal Government. This includes the rigorous implementation of tax reforms, diversification of the economy to reduce oil dependency, substantial investment in critical infrastructure, and the strengthening of governance frameworks to enhance transparency and accountability. These measures are essential for improving fiscal discipline, attracting investments, and building a resilient economic foundation.

For businesses, subject to its timely passage, we already see key economic benefits that are likely to positively impact the business landscape in Nigeria. The significant increase in capital expenditure is expected to translate to increased infrastructure development; it is also expected that the Country will enjoy a much more stable and predictable fiscal and monetary policy direction which will restore investor confidence and promote economic growth.

The Budget also records significant allocation of revenue to education:- supporting teacher training, supporting initiatives such as the Universal Basic Education, Vocational Training Initiative, the expansion of the National Open University of Nigeria, and the promotion of equal opportunity to education through  scholarships and grants to students from disadvantaged backgrounds. This will in the long run improve the size and depth of the Nation’s skilled workforce pool which has suffered significantly on account of increased workforce migration.

In summary, the 2025 budget presents promising opportunities for sectors such as manufacturing, agriculture, education and infrastructure with the increased capital flow to be recorded in the current fiscal year and the overall impact this will have on the overall economy. Nonetheless, businesses must remain proactive and adaptable, keeping a close watch on evolving fiscal policies, potential tax reforms, and macroeconomic indices that may impact their operations. Ultimately, the budget’s success will depend on timely legislative approval, efficient policy execution, and prudent fiscal management. These factors will determine the extent to which the 2025 budget influences Nigeria’s economic trajectory and the broader business landscape.

 

About DealHQ

We are a Pan-African transactional advisory firm dedicated to enabling businesses operate efficiently within Africa’s dynamic market. We provide stellar business solutions which help businesses navigate the unique challenges and opportunities in the African business landscape whilst enabling them to operate efficiently within their market sphere.

Our service offering includes: corporate commercial, real estate & construction, finance, capital markets & derivatives, mergers and acquisitions, private equity, infrastructure, technovation and data privacy, agriculture & commodities, business formations & start up support amongst others.

The content of this Article is not intended to replace professional legal advice. It merely provides general information to the public on the subject matter. Should you wish to seek specialist legal advice on this or any other related subject, you may contact us.

info@dealhqpartners.com

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DealHQ Partners
In Capital Markets, Corporate, Newsletters, Regulation & Policy

FEDERAL HIGH COURT RULES IN FAVOR OF SINGLE SHAREHOLDER COMPANIES

FEDERAL HIGH COURT IN A LANDMARK JUDGMENT EXPANDS SCOPE OF SINGLE SHAREHOLDER COMPANIES

On 30th July 2024, the Federal High Court sitting in Abuja delivered a notable judgment in Suit No: FHC/ABJ/CS/665/2023, to the effect that all private companies in Nigeria, regardless of when they were incorporated, can have a single shareholder. This landmark judgment clarifies the application of Section 18(2) of the Companies and Allied Matters Act 2020 (CAMA 2020) allowing older private companies to transition into single shareholder entities and has significant implications for business growth and development in Nigeria.

This ruling was delivered in the case of Primetech Design and Engineering Nigeria Limited (Primetech) & Julius Berger Nigeria Plc (JBN) v. Corporate Affairs Commission (CAC), which centered on Primetech’s attempt to transfer all its shares to JBN, making JBN the sole shareholder. Applications were made to the CAC on that effect however, the CAC refused to register the share transfer instrument, citing section 571(c) of CAMA 2020, which states that a company may be wound up if the number of members is reduced below two. The FHC in disagreeing with the argument of CAC that section 18(2) of CAMA 2020, which allows private companies to have a single shareholder, only applies to companies incorporated after the commencement date of CAMA 2020, ruled that this interpretation would defeat the ease-of-doing-business and the intentions of the legislature and would ultimately be discriminatory.

The court’s ruling resolves the uncertainty surrounding the scope of section 18(2), which previously seemed to only apply to private companies incorporated after the enactment of CAMA 2020. This decision paves the way for businesses to restructure and adapt to changing circumstances, promoting ease of doing business in Nigeria. The ruling also addresses concerns regarding section 571(c) of CAMA 2020, which permits winding up of companies with reduced membership. The court held that this provision does not apply to private companies exercising their right to have a single shareholder under section 18(2).

This judgment is a significant step for private companies in Nigeria as this has provided clarity on shareholder requirements and company structure. Companies whether incorporated under CAMA 2020 or the repealed CAMA 1990 can now transition into single/sole shareholder entities if desired without risk of being wound up by the regulator, promoting flexibility and business growth and ensuring a level playing field for all private companies in Nigeria.

It is important to note that the extent to which this ruling is sustained is subject to an appeal being filed at the appellate court by the regulator to upturn the decision of the FHC, until then, any private company, irrespective of when it was incorporated can transition into a single shareholder company.

 

About DealHQ

We are a Pan-African transactional advisory firm dedicated to enabling businesses operate efficiently within Africa’s dynamic market. We provide stellar business solutions which help businesses navigate the unique challenges and opportunities in the African business landscape whilst enabling them to operate efficiently within their market sphere.

Our service offering includes: corporate commercial, real estate & construction, finance, capital markets & derivatives, mergers and acquisitions, private equity, infrastructure, technovation and data privacy, agriculture & commodities, business formations & start up support amongst others.

Should you wish to seek specialist legal advice on this or any other related subject, you may contact our Corporate Services Team;

Email:info@dealhqpartners.com; clientservices@dealhqpartners.com

DealHQ Partners
In Capital Markets, commercial, Data Protection, Newsletters, Regulation & Policy, Technology

ROLE OF INTELLECTUAL PROPERTY RIGHTS IN PRESERVING THE BANKABILITY OF RESEARCH, DEVELOPMENT AND INNOVATION

Intellectual property (IP) refers to creations of the mind, such as inventions, original works of authorship, designs, and symbols, and so on. IP rights are legal rights granted to the creators of these works, allowing them to control their use, distribution, and reproduction. Intellectual Property (IP) rights constitute a vital component of today’s knowledge-based economy especially in the research, development and innovation, (R, D&I) industry.

R, D &I, are interconnected concepts that drive progress and growth. Research involves the systematic investigation of existing knowledge to discover and explore new dynamics. Development involves building and improving upon research by transforming ideas into products and creating functional prototypes. Innovation takes research and development further by transitioning, implementing and scaling the prototypes and solutions into practical products, or processes that create value. The output of these three concepts are regarded as proprietary assets because they represent valuable investments of time, resources, and expertise.

The IP rights generated through protecting the output of research, innovation, and development, such as patents, copyrights, industrial designs, trademarks, and trade secrets, provides a competitive advantage and bestows exclusive legal rights to the creators and innovators to exercise exclusive control over their intellectual creations and to benefit exclusively from all commercial value derived or derivable from such proprietary works.

By safeguarding this proprietary asset, IP rights promote the birthing of new ideas and technologies, ensuring that inventors and creators can optimize commercial benefits derivable from their works and to safeguard same against unauthorized, illegal and unfair use and exploitation.

The importance of Research and Development (R&D) in driving innovation is evident in the significant investments made globally. In 2019, global R&D expenditure totaled circa US$2.4 trillion, with East-Southeast and South Asia accounting for 39%, followed by North America (29%), and Europe (22%). This trend is expected to continue, with R&D World’s editors forecasting a global investment of $2.53 trillion in R&D by 2024, representing a significant increase over the previous years.

In Nigeria, the federal government continues to emphasize the importance of R&D in driving development. In March 2024, President Bola Ahmed Tinubu announced that his administration would dedicate 0.5% of the country’s Gross Domestic Product (GDP) to R&D. This is expected to jump start innovation and home-grown solution to imminent developmental and economic challenges plaguing the nation.

IP plays a crucial role in making R&D expenditure viable and worthwhile for innovators. IP ensures that inventors and creators can recover their investments and generate returns on their creative efforts, motivating them to continue innovating. However, in many cases, they underestimate the enormous commercial value inherent in the proprietary IP rights derivable across the different stages of innovation (from conception to research to ideation, development and final production stages where the result of their R&D converges into a tangible product or service capable of solving real everyday problems). Many innovators do not fully identify, understand, protect, and leverage all the streams of IP rights emanating from their R&D efforts thereby limiting their exploitation and commercialization potentials. Therefore, strategic IP management is crucial, as it creates an avenue for identifying, protecting, and harnessing these IP assets to drive R&D, innovation, and business success.

“IP plays a crucial role in promoting research, development and innovation, by encouraging creativity, investment, and collaboration.”

By recognizing the importance of IP and implementing strategic IP management, corporations, sovereigns and sub sovereigns can harness the full potential of innovation, gain competitive advantage, increase revenue, and make better decisions, ultimately driving social advancement and economic progress.

Significance of IP in Research

It is long established that research is the bedrock of innovation and IP rights are essential in promoting a thriving research environment. IP rights play a pivotal role in incentivizing researchers to create new knowledge pathways which usually precede new innovation and solutions to problems of everyday living and human existence across several industries and sectors including medicine, manufacturing, pharmaceuticals, food production, engineering, extractives, energy and climate, to mention a few.

Copyright plays a critical role in protecting research outputs when they are expressed in literary form by protecting the authorship of all original expression of documented research, including research papers, data compilations, and software. Copyrights foster a culture of knowledge sharing and collaboration by ensuring that researchers receive recognition and compensation for their intellectual contributions in documented form.

Patents, one of the most common intellectual property rights, grants exclusive right to an inventor to commercially exploit his work for a limited period, typically 20 years from the date of grant. This exclusivity encourages researchers to invest time and resources into developing new body of knowledge, new technologies, solutions or products without the fear of immediate imitation. Patents not only protect the functional aspects of inventions but also promote the disclosure of information; by requiring inventors to publicly disclose their innovations in exchange for exclusive rights. Patents facilitate the sharing of knowledge, expertise, and ideas which is essential for further scientific advancements.

In addition to patents, researchers can utilize industrial design IP in the exploratory and investigative phase of a project to safeguard their design-related research outputs, such as design concepts, prototypes, user interface (UI) and user experience (UX) designs, and design research and testing results. By doing so, researchers can prevent others from using or profiting from their design-related research findings without authorization, ensuring that their work remains confidential and secure.

The Impact of IP on Development

Development involves building upon research findings, testing, refining and implementing new ideas or solutions, embracing uncertainty and experimentation, working with others to develop working solutions, products, prototypes, models, or simulations, refining and improving new solutions based on feedback and learning.

The impact of IP on development is significant. IP rights, such as patents, trademarks, and copyrights, provide a framework for innovators to protect their creations and investments. This protection enables them to recover their investments put into the research and the development stage of their creative activity, generate revenue, and reinvest in further R&D, fostering a cycle of innovation. IP also facilitates collaboration and knowledge sharing, as companies and researchers can safely disclose their ideas and technologies without fear of misappropriation.

Moreover, IP rights can attract investment, talent, and partnerships, accelerating the development of new technologies and products, while promoting accountability, transparency, and trust in R&D collaborations, ultimately driving progress and economic growth.

The Significance of IP in Innovation

Research and development is the driving force behind innovation. Innovation is the process of transitioning research findings, developed prototypes, models, or simulations into practical applications. It involves creating and introducing new or improved products, services, processes, or business models that meet new or existing market needs. It is the introduction of change or novelty to existing solutions, products, or services, often through the application of new technologies, processes, or methods that were either developed or improved upon during the researching and development/testing stages. This can be in form of product innovation, process innovation, business model innovation, service innovation, social innovation, and sustainable innovation. At its core, innovation requires creativity, risk-taking, experimentation, collaboration, and iteration. It is also at this point that funding from investors or financial institutions becomes more accessible as the product or idea has reached a certain level of development and validation where the inventor is able to demonstrate a working prototype or a minimum viable product (MVP) that showcases the product’s potential.

IP is most crucial in this transition. IP rights like patents, incentivize innovators by providing them with a temporary monopoly on their creations, allowing them to commercially exploit their inventions, enables them to license their inventions, attract investment, and generate revenue. This financial return on investment encourages continuous innovation and the commercialization of new technologies.

The overarching Need for IP Registration

In general, intellectual property (IP) rights do not necessarily require registration to exist because many types of IP rights arise automatically upon creation or fixation of the work, invention, or innovation. However, for the purpose of establishing these rights, enjoying the first person benefits and gaining the ability to legally enforce IP rights, putting the public on notice becomes essential hence, registration becomes key.

The inherent rights attached to the creations of one’s mind in most situations can end up not being exercisable. For instance, patent rights are granted only after a patent application is filed and approved while for industrial designs, inherent rights may exist in some countries, but registration is typically required to secure protection.

While inherent rights may exist, registration often provides the benefits of:

  1. Legal recognition and evidence

Registration of IP provides official recognition of your IP rights and serves as proof of its creation and ownership.

Asides very popular IP which have been established in several jurisdictions, it is noteworthy that recognition is territorial and such evidence of ownership is only limited to the jurisdiction where the IP was registered. However, some international bodies like World Intellectual Property Organization (WIPO) allow for an extended scope of IP right protection and recognition to all its member states.

  1. Exclusive rights and enforcement powers

Registration grants the owner the exclusive rights to use, sell, or license your IP, and enables enforcement against infringement. This allows the owner to protect their innovations and prevent unauthorized use and profit from such innovation.

  • Market Exclusivity, Public notice and deterrence

The evidence of registration of an IP serves as a notice to the public to refrain from unauthorized reproduction, modification, commercialization, or any other form of usage of the IP, except with express authorization or in cases of fair usage thereby allowing the owner to enjoy exclusive benefits of their IP.

  1. Commercialization Opportunities

Registered IP can be licensed, sold, or used as collateral, hence creating new revenue streams and business opportunities.

  1. International recognition and protection

Registration in one country can provide a basis for seeking protection and exploiting global IP protection in other jurisdictions where such IP assets are in use. Certain intergovernmental organizations such as African Regional Intellectual Property Organization (ARIPO) on the regional level and World Intellectual Property Organization (WIPO) on a broader level also create an avenue for further protection to its member states. This is especially essential in today’s interconnected world, where innovations can quickly go viral.

Conclusion

Intellectual Property is a cornerstone of modern-day research, innovation, and development. By providing legal protection and economic incentives, IP encourages the creation and dissemination of new ideas and technologies. Its role in fostering a thriving research environment, driving development, and promoting innovative solutions, cannot be overstated. Stakeholders are encouraged to prioritize IP awareness, and strategic management to drive progress and impact. As the global landscape continues to evolve, the significance of IP and it’s protection in shaping the future of science, technology, and society will remain paramount.

This article is available in French, click here to read

About DealHQ

We are a Pan-African transactional advisory firm dedicated to enabling businesses operate efficiently within Africa’s dynamic market. We provide stellar business solutions which help businesses navigate the unique challenges and opportunities in the African business landscape whilst enabling them to operate efficiently within their market sphere.

DealHQ’s IP Advisory practice offers a proactive approach to IP management, helping you optimize your portfolio, enhance brand’s value, drive innovation, stay ahead of competition and avoid legal disputes.

Should you wish to seek specialized IP advise on this or any related matter in any jurisdiction within Africa, please contact our Intellectual Property Advisory Team;

Email: IPsupport@dealhqpartners.com; info@dealhqpartners.com; clientservices@dealhqpartners.com

DealHQ Partners
In Business, Capital Markets, CBN, commercial, Finance, Newsletters, Regulation & Policy

WHAT YOU NEED TO KNOW ABOUT THE APPROPRIATION ACT 2024

The 2024 Budget which has been tagged the “Budget of Renewed Hope” was signed into law on the 1st of January 2024 by the President of the Federal Republic of Nigeria; President Bola Ahmed Tinubu. The Budget represents a major milestone towards improving the overall health of the Nigerian economy and restoring macro-economic stability. In tandem with the last administration’s effort to keep to a consistent budget cycle, it was a relief to see the trend continue with the current administration.

The President in his speech at the Joint Session of the National Assembly on Wednesday, November 29, 2023, highlighted the priority areas for the Federal Government in the 2024 Appropriation Act. Primarily, the Budget is focused on setting the tone for achieving: job-rich economic growth, macro-economic stability, improved investment environment, enhanced human capital development, poverty reduction, and greater access to social security. The President further noted that defense and internal security, human capital development, investment in education, and a greener and sustainable economy remain the core elements of his administration’s budget objectives.

The budget proposal is underpinned by the assumptions outlined in the multi-year Medium Term Expenditure Framework (MTEF) 2024 -2026 and Fiscal Strategy Paper (FSP) which serve as a vital tool for prudent fiscal management and resource allocation. The Medium-term Expenditure Framework takes into account factors such as inflation, lending rate, currency exchange rate, foreign exchange reserve size, capital import flows and preceding year budget performance, to determine the key assumptions underpinning the fiscal plan for the 2024 financial year.

Comparative Analysis of Key Budget  Assumptions

  2024 2023 2022
Crude Oil Price (Per Barrel) USD77.96 USD75 USD62
Crude Oil Production (MBPD) 1.78 1.69 1.86
GDP Growth Rate 3.88% 3.75% 4.2%
Inflation Rate 21.40% 17.16% 13%
Exchange Rate (USD 1) NGN 800 NGN 435.57 NGN 410.15
Table 1: Comparison of key assumptions underlying Nigerian budgets from 2022 to 2024
                                                            Fig 1: Key assumptions in the 2024 budget

 

Key Elements of the Budget – Revenue summary

Of the total NGN28.78 Trillion required to fund this year’s budget; the Federal Government’s assumption on Total Revenue available to fund the Budget is estimated at NGN19.60 Trillion, with NGN9.21 Trillion projected to come from oil-related sources, NGN3.52 Trillion from non-oil sources, and NGN6.87 Trillion from other Independent sources, including revenue of GOEs (Government Owned Enterprises), aids, grants and social funds/Accounts receipts. Whilst many believe that the Federal Government’s 2024 Revenue assumptions are quite ambitious; the revenue assumptions underpinning the 2023 Appropriation Act returned quite close to call at the end of the financial year flaring the Government’s optimism for its forecasted income.

 

                                                                   Fig 2: Summary of the revenue allocation in the 2024 budget

 

Key Elements of the Budget – Expenditure Summary

The Appropriation Act 2024 projects a total aggregate expenditure of NGN 28.78 Trillion, which is 10.9% higher than the total aggregate expenditure for 2023 including approved supplementary budgets.

The total aggregate expenditure for 2024 is projected to be NGN28,777,404,073,861, broken down as follows:

    1. Aggregate Capital expenditure is estimated at NGN9.99 Trillion (35% of the total aggregate expenditure)
    2. Recurrent (non-debt) expenditure is estimated at NGN8.7Trillion (30% of the total aggregate expenditure)
    3. Total Debt service is estimated at NGN8.27Trillion, representing 29% of the total aggregate expenditure
    4. Statutory transfers are estimated at NGN1.74 Trillion, representing 6% of the total aggregate expenditure

Of the total aggregate expenditure approved for the 2024 financial year, a total of NGN5.3 trillion is appropriated for the service of domestic debts, NGN2.748 trillion is appropriated for the service of foreign debts, while N223.662 billion is to be held in a Sinking Fund Account for the retirement of maturing promissory notes.

Fig 3: Percentage based representation of revenue allocation under the 2024 budget

 

  2024 2023 2022
Aggregate Expenditure NGN28.7tn NGN21.83tn NGN17.13tn
Statutory transfers NGN1.743tn NGN967.49bn NGN869.67bn
Recurrent (non-debt) expenditure NGN8.769tn NGN8.33tn NGN6.91tn
Capital expenditure NGN9.995tn NGN6.46tn NGN5.47tn
Debt service NGN8.271tn NGN6.31tn NGN3.61tn
Sinking Fund NGN223.662bn NGN247.7bn NGN270.7bn
Table 2:  YOY Comparison of expenditure allocation in the budgets from 2022 – 2024

Key Elements of the Budget – Budget Deficit and Deficit Financing

The Budget deficit for the 2024 fiscal year stands at NGN9.179 trillion, representing 3.88% of our National GDP and representing a massive 33.38% reduction from the 2023 budget deficit. This downward trend evidences a demonstration of significant expenditure discipline. The NGN9.179Trillion Budget deficit is projected to be financed through asset sales/privatization which Federal Government estimates will return circa NGN298,486,421,740; multilateral/bilateral project-tied loans disbursements estimated at NGN1,051,914,486,314 and other debt financing sources estimated at NGN7,828,529,477,860.

The National Assembly has approved the Federal Government’s request to borrow USD7.8billion and EUR100 million as part of its 2022 – 2024 borrowing plan. The Loan Facilities which were initially approved on May 15, 2023 by the Federal Executive Council (FEC) under former President Muhammadu Buhari will be utilized in key priority sectors such as finance infrastructure, healthcare, education, agriculture and security amongst others.

 

Securitization of Ways and Means Advances from the CBN

The National Assembly on the 30th of December 2023 approved the securitization of the outstanding debit balance of NGN7.3 trillion Ways and Means Advance from the Federal Government.

Ways and Means is a loan facility through which the CBN finances the government’s budget shortfalls, made pursuant to section 38 of the CBN Act 2007, which stipulates that the apex bank may grant temporary advances to the federal government in respect of temporary deficiency of budget revenue provided such overdraft do not surpass five per cent of the government revenue from the previous year.

 

Analysis of the 2024 Budget – Key highlights  

  1. Macroeconomic assumptions

Many schools of thought following the passage of the 2024 Appropriation Act have questioned the underlying assumptions in the budget given current macroeconomic realities and historic performance. For instance, the USD benchmark for the Budget is pegged at NGN800/1USD whereas as at the time of this publication the official exchange rate as published by the Central Bank is averaging NGN1400/USD. An overview of the Budget performance for 2023 also shows significant variation between the underlying macro-economic assumptions and the actual position; specifically in relation to inflation rate, foreign exchange rate and oil production levels giving a strong basis for the perceived pessimism. Benchmark inflation rate for 2023 was 17.6% relative to an actual inflation rate of 28.20% as of December 2023; Benchmark USD exchange rate was NGN437.57/USD1, whilst actual exchange rate was NGN853/USD1 as at December 2023. Similarly, oil production levels of 1.49mbpd was below the 2023 Budgetary assumption pegged at 1.69mbpd.

If the 2023 budget performance is anything to go by, it is safe to say that the 2024 Budget assumptions do not accurately reflect current macroeconomic trends raising concerns about increased deficit and the consequent borrowing to meet expenditure shortfalls.

  1. Ambitious Revenue Assumptions

Many have described the revenue assumptions underpinning the 2024 Budget as overly ambitious and doubtful; projecting a total NGN19.60 trillion revenue being a 54% increase relative to the 2023 revenue forecast. The assumptions around the benchmark price of crude oil and the projected daily oil production target of 1.78mbpd seems to be in complete dissonance with historical performance (Nigeria recorded an average production rate of 1.2mbpd over the last 2 years) and current market realities including decline in oil production, unabated oil theft and committed future production tied to swaps and forward contracts. Additionally, the increase in non-oil revenue assumptions from NGN2.43 Trillion in 2023 to NGN3.52 Trillion in 2024 seems not to have taken cognizance of shrinking economic activities, and lower consumption of VAT related goods due to ongoing economic hardship.

  1. Ways and Means Advances

The securitization of the due and outstanding NGN7.3 Trillion Ways and Means advance has remained one of the most debated elements of the 2024 fiscal plan; The continued reliance by the Federal Government on Ways and Means advances to fund budget deficits and subsequently requesting its securitization rather than repayment raises significant concern about budget discipline and Nigeria’s growing debt profile. Ways and Means Advances are primarily short-term, or emergency funding disbursed by the Central Bank of Nigeria to the Federal Government to fund delayed government cash receipts.

Whilst Section 38 of the CBN Act authorizes the Ways and Means Advances by the Central Bank; it limits the total available to draw amount to 5% of the actual revenue of the Federal Government for the preceding year, whilst also mandating that repayment be done within the same calendar year in which it is disbursed. Over the last 8 years Federal Government has continued to accrue ways and means liabilities without any reasonable repayment structure hence the pressure to restructure them into securitized loan notes. Recall that the National Assembly in 2023, similarly approved the President Buhari led Administration’s request to securitize about NGN22.7Trillion of ways and means obligations accrued during his 8 year tenure.

Following the National Assembly’s approval of the proposed Securitization, the Federal Government would issue debt notes to the Central Bank for a tenure of 40 years at an annual interest rate of 9% Per Annum (significantly less that the cost of carry of the CBN Ways and means Advance which was MPR+3%). Further, the loan will be included in the National Debt Profile for transparency.

It is important to note that the Ways and Means advances finds judicial backing in the provisions of Section 38 of the CBN Act. It is however also important to add that while Section 38 of the CBN Act empowers the CBN to advance this facility, the Act provides that the amount of such advances outstanding shall not at any time exceed 5% of the previous year’s actual revenue of the Federal Government and that all such advances when disbursed shall be repaid within the same Financial Year in which it is granted.

  1. The Emergency Economic Intervention Bill

Even though the President, in his speech, confirmed that current tax and fiscal laws are being reviewed to increase the ratio of revenue to GDP to 18 percent, the current administration unlike its predecessor has not passed a finance bill alongside its Appropriation Act. It is important to note however that the Presidential Fiscal Policy and Tax Reforms Committee Emergency has proposed an Economic Intervention Bill which appears to propose changes to certain tax and fiscal laws. It our considered opinion however, that when passed, the Emergency Economic Intervention Bill may support the implementation of the 2024 Budget and enhance the prompt realization of Federal Government’s revenue assumptions and government’s revenue generation plans.

Conclusion

With impressive continuity, the Bola Ahmed Tinubu led administration has kept to the culture of prompt passage of the Budget. Generally, the budget is quite ambitious as it generally takes a posture of increasing government spending to support real economic growth. Whilst the Government’s assumptions on revenue seem overly optimistic, there is a marked reduction in budget deficit and increased capital expenditure relative to recurrent expenditure. Despite concerns about some mismatch in the assumptions underpinning the Budget; key stakeholders generally remain optimistic about the potential of Nigeria’s biggest budget yet to deliver on the Federal Government’s mantra of “Renewed Hope”.

 

About DealHQ

We are an Africa Focused deal advisory/boutique commercial law firm focused on supporting businesses and positioning them to operate efficiently within their market sphere. We are known for our quality service delivery which is focused on attention to detail, creativity, timely execution and client satisfaction.

Our service offering includes: corporate commercial, real estate & construction, finance, capital markets & derivatives, mergers and acquisitions, private equity, infrastructure, technovation and data privacy, agriculture & commodities, business formations & start up support amongst others.

The content of this Article is not intended to replace professional legal advice. It merely provides general information to the public on the subject matter. Should you wish to seek specialist legal advice on this or any other related subject, you may contact us.

HOW TO GET STARTED

Do you need to know more about the Appropriation Act? Our Finance team is available to support you.

You may contact our team on: Email: info@dealhqpartners.com Telephone: +234 1 4536427 or +234 9087107575

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DealHQ Partners
In Business, Capital Markets, CBN, Newsletters, Regulation & Policy, Technology

CBN LIFTS RESTRICTION ON THE OPERATION OF BANK ACCOUNTS BY VIRTUAL ASSETS SERVICE OPERATORS (VASPs) IN NIGERIA.

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On Friday 22nd December 2023, the Central Bank of Nigeria (“CBN”) lifted its hitherto ban restricting banks and financial institutions from dealing in or facilitating cryptocurrency related transactions through its recently published “Guideline on Operations of Bank Accounts for Virtual Assets Service Providers (VASPs)” which now authorizes Banks and other Financial Institutions to provide  banking services to virtual asset service providers (VASPs) in compliance with relevant anti-money laundering laws issued by competent authorities. VASPs, Digital Assets Custodians, Digital Assets Offering Platforms, Digital Asset Exchanges, Digital Asset Exchange Operators, and any other entity that may be categorized by the CBN who are licensed by the Securities and Exchange Commission, can now legally operate a designated account with banks and financial institutions subject to the conditions stipulated in the Guideline.

The CBN’s earlier directive of February 5th, 2021, had excluded cryptocurrency transactions from the scope of transactions permitted to be facilitated or processed by financial institutions operating within Nigeria’s mainstream banking system. The 2-year ban which was the Apex Bank’s response to global concerns around money laundering and terrorism finance risks underlying the very opaque and unregulated cryptocurrency market has set the country back significantly from harnessing the benefits of the early adoption of digital currencies as a viable financial asset class.

The Guideline signals a positive change for Nigeria’s hitherto comatose digital assets ecosystem as financial institutions can now outside of their primary activity; facilitate the opening and operation of accounts for VASPs whilst being mandated to establish adequate risk management systems for combating money laundering, financing of terrorism and countering proliferation financing and to ensure adequate activity monitoring/tracking and customer protection. It is worthy of note that this guideline still prohibits banks and other financial institutions from holding, trading and/or transacting in virtual currencies on their own account.

The Guideline prescribes strict requirements for the onboarding of VASPs and operation of bank accounts by VASP account holders – including protocols for customer onboarding/due diligence in a bid to entrench transparency and effective reporting.  Also, it sets operational and transactional limit for all VASP accounts whilst… Click here to download article

 

About DealHQ

We are an Africa Focused deal advisory/boutique commercial law firm focused on supporting businesses and positioning them to operate efficiently within their market sphere. We are known for our quality service delivery which is focused on attention to detail, creativity, timely execution and client satisfaction.

Our service offering includes: corporate commercial, real estate & construction, finance, capital markets & derivatives, mergers and acquisitions, private equity, infrastructure, technovation and data privacy, agriculture & commodities, business formations & start up support amongst others.

The content of this Article is not intended to replace professional legal advice. It merely provides general information to the public on the subject matter.

Email: info@dealhqpartners.com; clientservices@dealhqpartners.com

Telephone: +234 1 4536427 or +234 9087107575

 

DealHQ Partners
In Data Protection, Newsletters, Regulation & Policy, Technology, Trend

WHAT YOU NEED TO KNOW ABOUT THE RECENTLY PUBLISHED NDPC GUIDANCE NOTICE ON THE FILING OF DATA PROTECTION COMPLIANCE AUDIT RETURNS.

Introduction

In compliance with the Nigeria Data Protection Act (“NDPA”), the Nigeria Data Protection Commission (“NDPC/Commission”) on 15th of November 2023 published its Guidance Notice (Notice) on the Filing of Data Protection Compliance Audit Returns (CAR) which is set to take effect from 1st January 2024. This notice sets out procedure to be adhered to by Data Processors and controllers when filing their mandatory annual Compliance Audit Report with the Commission emphasizing the Commission’s commitment to tighten the oversight role in the protection and enforcement of Data Subject rights on the one hand and to engender data usage trust within Nigeria’s burgeoning digital ecosystem.

The Guidance Notice highlights the requirements for inclusion in the Commission’s National Data Protection Adequacy Programme (NaDPAP) Whitelist to be published by the Commission on Data Controllers and Data Processors who demonstrate commitment to safeguarding Data Subjects Rights and prioritize compliance with NDPR.

  1. NDPR Remains the Primary Regulation Governing Annual CAR Filings in Nigeria

The Guidance Notice lays to rest any doubt about the continued applicability of the NDPR following the enactment of the Nigeria Data Protection Act by recognizing it as the primary regulation governing the filing of the mandatory Compliance Audit Report. Data Controllers and Data Processors who have processed personal data of more than 2000 data subjects within the preceding 12 months are by law, mandated to file their Data Protection Compliance Audit Report with the Commission, in accordance with Articles 4.1 (5 & 7) of the NDPR.

It is noteworthy to mention that this is consistent with Section 64(2)(f) of the NDPA, which states that the provisions of NDPR remains in full force and effect except to the extent that any of its provisions is overridden by or conflicts with any provision of the Act.

  1. Vital Role of Data Protection Compliance Organizations

The Notice emphasizes the crucial role of Data Protection Compliance Organizations (DPCOs) in the implementation of Nigeria’s Data Protection framework by supporting Data Controllers and Data Processors to developing self-guided compliance strategies that demonstrate transparent and accountable reporting in line with the NDPR. Specifically, the Guidance Notice identifies the underlisted as the key responsibilities of DPCOs:

i.   Facilitating the filing of CAR with the Commission:

DPCOs support Data Controllers and Processors with the conduct of Audits and submission of Reports with the Commission in line with the NDPR. The Notice emphasizes the need to ensure that DPCO’s services are priced in a manner that guarantees minimal financial burden on Data Controllers and Processors.

ii. Engaging in Non-Fee-Paying CAR Work:

DPCOs are encouraged to occasionally provide audit support service to start-ups, not for profit organizations and businesses who are unable to pay for the mandatory audit service as part of their Corporate Social Responsibility (CSR) to foster inclusive compliance.

iii. Knowledge Transfer for DPOs during Audit Exercise:

DPCOs are required to use the Audit exercise as an opportunity to provide practical training for DPOs and other personnel in the Client Organizations they serve. Evidence of such practical training embedded in the audit exercise will entitle the participating DPOs to Continuous Professional Development (CPD) Credit, which will be an essential audit parameter under the soon to be published NDPA General Application and Implementation Directive (GAID).

  1. Getting Listed on the NaDPAP Whitelist

The Notice outlines the compliance metrics for inclusion in the National Data Protection Adequacy Programme (“NaDPAP”) which include verifiable compliance with Data Protection Principles and Lawful Basis such as Privacy Policies and Notices, Consent forms; regular filing of CAR, sensitization of data subjects on data subjects’ rights, appointment of DPO, engagement of a DPCO, training and capacity building for Staff amongst others.

Successful filing of the CAR entitles Data Controllers/Processors to be listed in the National Data Protection Adequacy Programme (NaDPAP) Whitelist.  It is worthy to note that failure of a data controller or processor to file CAR as legally required is a ground for disqualification from being listed on the NADPAP Whitelist irrespective of whether such Data Controller or Processor has proven data privacy compliance policies and framework that comply with the prescribed requirement of the NDPA and NDPR.

Whilst being listed in the NaDPAP Whitelist establishes a presumption of compliance and a demonstration of the data controller/processors commitment to safeguarding data-subjects rights; it does not confer immunity or protection against Data Subject claims or liabilities.

  1. Mandatory Induction Training for DPOs

All designated DPOs are required to participate in the free induction training that will be organized by the Commission in January 2024. The training is expected to re-enforce the rights of data subjects and compliance obligations outlined in the NDPA and the GAID.

  1. Minimum Information Requirement for inclusion in a Compliance Audit Report

The notice highlights the key focus areas for any CAR to be filed with the Commission. Each Report accompanying the NDPC audit questionnaire shall at the minimum cover the underlisted:

i.  Evidence of the Data Controller/Processor’s awareness of the provisions of the NDPR, as contained in the  internal data privacy framework of the organization.

ii. Evidence of Capacity Building and Continuous Training of Staff, Contractors, Licensees on their obligations as data administrators under the NDPA.

iii. Implementation of Privacy Policy and Notices within the organization, that align with NDPR requirements.

iv. Clear and detailed compliance directives communicated to all individuals involved in data processing, emphasizing adherence to the NDPR.

v.  Appointment and availability of Data Protection Officers overseeing and ensuring compliance with the NDPR.

vi. An inventory of the categories of personal data being processed and maintained by the Data Controller or Data Processor, specifying the principles and lawful basis for processing each category.

vii. Technical Measures implemented to ensure Confidentiality, Integrity, and Availability of Personal Data guided by the principles of Privacy by Design and by Default.

vii. The institutionalization of a robust mechanism for addressing grievances related to data protection.

viii. A comprehensive list of all agents or contractors engaged in data processing, along with details of their training programs and overall compliance with the NDPA.

  1. Default and Non-Compliance with filing CAR

Non – Compliance with CAR filing on or before the deadline which is set for March 2024 attracts a default fee of an additional 50% of the filing fee. Additionally, non-compliance with the Notice may amount to a violation of the NDPA, which attracts penalty as prescribed under the NDPA.

Conclusion

It is imperative for Data Controllers and Data Processors to prioritize timely and efficient filing of the yearly mandatory Data Privacy Compliance Audit Report in accordance with the NDPA and this not only signifies adherence to regulatory standards but also underscores a collective responsibility to fortify data privacy measures, ensuring a safe and secure digital ecosystem for all stakeholders.

 

This Article is written by DealHQ’s Technovation and Data Governance Practice Team.

DealHQ is a licensed Data Protection Compliance Organization (DPCO). We understand the importance of safeguarding sensitive data and complying with local and foreign data protection laws applicable to your business to protect your organization’s reputation and mitigate potential cybersecurity or data violation risks which can have significant financial, legal, and systemic implications for your Business. Our service niche includes (1) Data Protection/Governance Advisory (2) Data Protection Compliance Support (3) Data Protection Audit Services and (4) Outsourcing of Data Protection Officers.

*The content of this Article is not intended to replace professional legal advice. It merely provides general information to the public on the subject matter.*

To know more about our Data Privacy Services? Please contact our team:

Email: info@dealhqpartners.com; clientservices@dealhqpartners.com

Telephone: +234 1 4536427 or +234 9087107575

DealHQ Partners
In Capital Markets, CBN, Newsletters, Regulation & Policy, Technology

Overview of the Guidelines for Contactless Payments in Nigeria

Nigeria has experienced significant growth and development in its financial sector, driven in large part by the integration of technology.
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The financial services sector has been at the forefront of leveraging technology to address challenges, enhance services, and stimulate economic growth. With banks and fintech companies in Nigeria embracing innovative solutions such as mobile banking, online platforms, and electronic payment systems to offer convenient and accessible financial services to a wider population, it is clear that there is a recognition of the potential inherent in technology to reshape financial services.
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About DealHQ

We are an Africa Focused deal advisory/boutique commercial law firm focused on supporting businesses and positioning them to operate efficiently within their market sphere. We are known for our quality service delivery which is focused on attention to detail, creativity, timely execution and client satisfaction.

Our service offering includes: corporate commercial, real estate & construction, finance, capital markets & derivatives, mergers and acquisitions, private equity, infrastructure, technovation and data privacy, agriculture & commodities, business formations & start up support amongst others.

The content of this Article is not intended to replace professional legal advice. It merely provides general information to the public on the subject matter.

You may contact our team on:

Email: info@dealhqpartners.com; clientservices@dealhqpartners.com

Telephone: +234 1 4536427 or +234 9087107575

DealHQ Partners
In Capital Markets, CBN, Newsletters, Regulation & Policy, Technology

WHAT YOU NEED TO KNOW ABOUT THE NIGERIA DATA PROTECTION ACT, 2023

INTRODUCTION

As technology and digital innovation continues to advance, the volume of data generated and exchanged by users of the internet, mobile/web applications and other digital devices has raised the security of personal data to the status of “matter of national concern” in Nigeria.

On the 14th of June 2023, the President of the Federal Republic of Nigeria, signed into Law, the Nigerian Data Protection Act (the Act) thereby establishing by statute, the Nigerian Data Protection Commission; which is entrusted with the power to make and enforce regulations for the protection and security of the personal data of Data Subjects in Nigeria.

  1. SCOPE OF THE LAW

The Act provides the legal framework for the establishment of the Nigeria Data Protection Commission, the regulation of the processing of personal data of Data Subjects, and for other related matters. The objective of the Act is to safeguard the constitutional right of Data Subjects in Nigeria as relates to the processing activities undertaken by Data Processors or Data Controllers.  A Data Controller is a person, organization, or a statutory body who determines the purposes for, and the way Personal Data is processed or is to be processed. Consequently, a Data Processor is one who processes the data in the manner prescribed by a Data Controller).

  1. WHO DOES THE ACT APPLY TO?[1]

The Act applies to and is binding on Data Controllers or Data Processors who are either:

  1. Resident or operating in Nigeria;
  2. Processing data within Nigeria; or
  3. Processing data of Data Subjects in Nigeria.
  1. EXEMPTION

Data Controllers or Processors who fall into any of the underlisted categories are exempted from the application of the Act:

  1. One or more individuals who process personal data solely for personal or household purposes;
  2. Data Controllers or Processors who deal with/process personal data which have been prescribed for exemption by the Commission.
  1. ESTABLISHMENT OF THE NIGERIA DATA PROTECTION COMMISSON

The Act establishes the Nigeria Data Protection Commission as an independent body responsible for prescribing regulations, codes, guidelines, and procedures in furtherance of its functions geared towards the enhancement of personal data protection.

The overall policy direction of the affairs of the Commission shall be controlled by a governing council which shall consist of seven people headed by a Chairman who shall be a retired judge of a superior court of record. All seven members of the governing council shall be appointed by the President on the recommendation of the Minister.[2]

  1. LAWFUL BASIS FOR PROCESSING PERSONAL DATA

Personal Data of a Data Subject can only be processed when a lawful basis for such has been established. The Act like other Data Privacy statutes (such as the GDPR) recognizes that Lawful Basis shall be deemed established in the following scenarios:

  1. Consent: Data Subject’s consent has been procured and the consent has not been withdrawn;
  2. Contract: Processing the personal data is necessary or the performance of a contract for which the Data Subject is a Party;
  3. Legal Obligation: Processing the data is necessary for compliance with a legal obligation to which the Data Controller or Processor is subject;
  4. Public Interest: Processing the personal data is necessary for public interest purposes or in exercise of official authority vested in a controller;
  5. Vital Interest: to protect a life;
  6. Legitimate Interest: Where the processing of personal data of a data subject is necessary in the legitimate interest of the processor or another third party.

Relatedly, even after Lawful Basis is established, every Data Processor is expected to adhere to these general principles:

  1. Personal Data must be processed in a fair and transparent manner;
  2. Personal Data must be collected for a specified and legitimate purpose; and must not be further processed in a manner or for a purpose incompatible with that which has been specified;
  3. Personal Data collected must be limited to that which is adequate and relevant for the purpose for which it is collected;
  4. Personal Data must be retained only for only as long as is necessary to achieve the Lawful Basis for which it was collected;
  5. Personal Data must be processed in a manner that guarantees the security of personal data against loss, unlawful processing, destruction loss or damage.
  6. Personal Data is processed for the purpose of a legitimate interest by a data controller or third party to which the data is disclosed.
  1. KEY PROVISIONS TO NOTE

Amongst other things, the following mandatory provisions are to be noted by and complied with by all Data Controllers and Processors:

a. MANDATORY APPOINTMENT OF A DPO

All Data Controllers and Processors of major importance[3] are now mandated to appoint a designated Data Protection Officers (DPO) with expert knowledge of data protection laws and practices and who may either be an employee of the organization or engaged under a valid service contract[4].

b. DATA PROTECTION IMPACT ASSESSMENT

Every Data Processor or Controller who envisages that any of its processing activity is likely to violate or result in high risk to the rights and freedom of  Data Subjects by virtue of its nature, scope, context and purpose; is mandated to conduct a data protection impact assessment. It is expected that the Commission will issue guidelines to establish the categories of processing which will now require the conduct of data protection impact assessment.[5]

c. REPORTING DATA BREACHES

Every Data Controller is required to notify the Commission within 72 hours of becoming aware of any personal data breach which is likely to result in a risk to the right and freedom of a Data Subject.[6]

d. CROSS BORDER DATA TRANSFER

Cross-Border Transfer of personal data to third parties no longer requires the supervision/consent of the Attorney General of the Federation. Notwithstanding Personal Data of Data Subjects cannot be transferred to a cross border recipient; unless the transferor has satisfied itself that the foreign third-party recipient:

  1. Has a lawful basis for processing such data;
  2. Has in place a mechanism to ensure adequate level of protection of such data to the extent and level prescribed by the Act. [7]

e. REGISTRATION OF DATA PROCESSORS AND CONTROLLERS

The Act mandates the registration of Data Controllers and Data Processors of major importance with the Commission within six months from the commencement of the Act or of becoming a Data Controller or Data Processor of major importance.  The Act also prescribes the process of registration and grants the Commission the power to prescribe the registration fee and to grant exemptions from registration at their reasonable discretion. Furthermore, Registered Processors and Controllers must notify the Commission of any change in the registration details provided.

The Commission is expected to keep a register of Data Controllers and Processors on its website and to update same regularly. When a Data Controller or Data Processor ceases to be one of major importance, it must notify the Commission who shall remove its name from the register[8].

f. GENERAL RIGHTS OF DATA SUBJECTS

The Act guarantees Data Subjects the inherent right to:

  1. Obtain from a Data Controller; confirmation as to whether its personal data is being stored or processed and where so; further information on the purpose, nature/category of data being processed, recipients of such data including international/cross border recipients, period for which data will be kept;
  2. Right to demand rectification, erasure or restriction in processing (pending resolution, objection or enforcement of a legal claim) without delay;
  3. Right to decline to give or to withdraw consent;
  4. Right to demand discontinuation of processing (except on grounds of public interest);
  5. Right to lodge a complaint with the Commission;
  6. Right not to be subject to a decision based solely on automated processing of personal data.

g. RIGHT OF AGGRIEVED DATA SUBJECTS TO FILE COMPLAINTS WITH THE COMMISSION

The Act has provided a procedure for Data Subjects whose rights have been violated or is likely to be violated by any Data Controller or Processor; to file a complaint with the Commission[9]. The Commission is mandated to investigate and where it is established that the right of a Data Subject is likely to be violated, the Commission will  issue an appropriate compliance order  against such Data Controller including:-  (1) a warning (2) a directive to comply or (3)  a cease and desist order.

Where however an actual violation is established; the Commission may issue an enforcement order issuing sanctions against such Data Processor or Controller. Such order may include (1) a directive to remedy (2) a directive to pay compensation (3) order to account for profits made from a violation (4) order to pay penalty which in the case of a Data Controller of major importance will be the higher of NGN10Million or 2% of gross revenue for the preceding financial year.  Where the offender is not a Data Controller of major importance, the penalty will be the higher of NGN2Million OR 2% of gross revenue for the preceding financial year. Where Data processor or controller is dissatisfied with the order imposed by the commission, it is at liberty to apply to court for judicial review, within thirty days of the issuance such order[10].

Where an order is defiled, the defaulting Processor or Controller commits an offence and becomes criminally liable upon conviction by a competent court [11]. The court may also order the Processor or Controller upon conviction to forfeit any economic benefit or financial proceeds in accordance with the Proceeds of Crime (Recovery and Management) Act or any other similar law.[12]

h. JOINT AND VICARIOUS LIABILITY

Directors, Managers, Partners, Secretaries or other similar officer of any convicted Data Processor or Controller shall be deemed jointly and vicariously liable with the organization for any breach or violation or offense under the Act; unless such officer can prove that the offence was committed without his/her knowledge, consent or connivance; and that he/she exercised all such diligence to prevent the commission of the offence. Data Controllers and Data Processors also remain vicariously liable for the acts or omissions of their agents, clerks, servants or employees.[13]

  1. LIMITATIONS IN RESPECT OF LEGAL PROCEEDINGS AGAINST THE COMMISSION

Whilst the Commission remains a legal entity which can sue or be sued, Actions against the Commission are required to be instituted within three months of the time in which such cause of action arose and subject to the service of a one month written notice of intention to sue having been served on the Commission. The Act further directs that no execution or attachment process can be issued against the property of the Commission in respect of an action or suit filed against it[14].

  1. TRANSITIONAL PROVISION

The Act  recognizes and has given legitimacy to  all  actions (orders, rules,  decisions, directions, licenses and authorizations) of NITDA, OR the Bureau  done prior to the coming into force of the Act as if they are acts of the Commission itself and they shall remain binding  until they are waived, cancelled or repealed by the Commission. This includes specifically, the Nigerian Data Protection Regulation (NDPR) 2019.[15] The Nigeria Data Protection Commission effectively succeeds the erstwhile Nigeria Data Protection Bureau (NDPB) and puts to an end the argument that the NDPB is not statutorily created.

IMPLICATION FOR BUSINESSES IN NIGERIA

It is clear given the priority and attention given to  the assent of the by the newly elected President of Nigeria and the Federal Executive Council; that data privacy is recognized as a critical focus area for the Federal Government. It can therefore be fairly deduced that enforcement of the Act will be top of mind for the Government and the Commission.

The Act has further mandated registration for all data processors and controllers within the next six months. Consequently, Businesses operating in Nigeria except where exempt will be required to immediately reposition their protocol of operation to ensure consistent compliance with the Act. Finally, Data Processors and Controllers must keep as top of mind the potential risk of sanctions and criminal liability where they have directly or vicariously violated the rights Data Subjects as guaranteed under the Act.

This Article is written by DealHQ’s Technovation and Data Governance Practice Team, DealHQ is a licensed Data Protection Compliance Organization (DPCO). We understand the importance of safeguarding sensitive data and complying with local and foreign data protection laws applicable to your business to protect your organization’s reputation and mitigate potential cybersecurity or data violation risks which can have significant financial, legal and systemic implications for your Business. Our service niche includes (1) Data Protection/Governance Advisory (2) Data Protection Compliance Support (3) Data Protection Audit Services and (4) Outsourcing of Data Protection Officers.

About DealHQ

We are an Africa Focused deal advisory/boutique commercial law firm focused on supporting businesses and positioning them to operate efficiently within their market sphere. We are known for our quality service delivery which is focused on attention to detail, creativity, timely execution and client satisfaction.

Our service offering includes: corporate commercial, real estate & construction, finance, capital markets & derivatives, mergers and acquisitions, private equity, infrastructure, technovation and data privacy, agriculture & commodities, business formations & start up support amongst others.

The content of this Article is not intended to replace professional legal advice. It merely provides general information to the public on the subject matter.

Do you need to know more about our Data Privacy Services? You may contact our team on:

Email: info@dealhqpartners.com; clientservices@dealhqpartners.com

Telephone: +234 1 4536427 or +234 9087107575

Click here to download article…

[1] Part I Nigerian Data Protection Act, 2023.

[2] Part II and III of the Act.

[3] A Data Controller or Processor domiciled, resident in or operating in Nigeria who processes or intends to process personal data of such number of Data Subject within Nigeria as the Commission may prescribe as being of major importance.

[4] Section 33 of the Act.

[5] Section 29 of the Act.

[6] Section 41 of the Act.

[7] Part IX of the Act.

[8] Part X of the Act.

[9] Sections 47, 48 and 49 of the Act.

[10] Section 51 of the Act.

[11] Section 50 of the Act.

[12] Section 53 of the Act

[13] Section 54 of the Act

[14] Part XII of the Act.

[15] Section 64 the Act.

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