TOPIC:
- HIGHLIGHTS OF KEY GENERAL AND SPECIFIC SECTORAL REQUIREMENTS FOR ESTABLISHING
AND MANAGING AN SPV AS A PRIVATE LIMITED LIABILITY OR PUBLIC COMPANY IN
NIGERIA: - SELECTED EXPERIENCES OF THE SPV-PPP PRACTICE IN THE ENERGY,
PETROLEUM, CONSTRUCTION, FINANCE AND CAPITAL MARKET SECTORS.
BY
PROF MUHAMMED TAWFIQ LADAN
INTRODUCTION
The
goal of this Policy issue brief is to highlight key general and specific
sectoral requirements for establishing and managing an SPV as a private limited
lability or Public Company in Nigeria. To achieve this goal, this brief
outlines the legal and regulatory requirements that are of general and
sector-specific application for establishing and managing SPVs in Nigeria's
telecom sector: it provides examples of SPV practiced in non-telecom sectors;
it identifies key challenges and prefer recommendation to foster a competitive
Sustainable, and resilient telecommunications infrastructure deployment
framework.
HIGHLIHTS
OF KEY GENERAL AND SPECIFIC REQUIREMENTS FOR ESTABLISHING AND MANAGING SPV THAT
IS EITHER PRIVATE LIMITED LIABILITY OR PUBLIC LIMITED COMPANY IN NIGERIA
General
Corporate Requirements for SPVs under the Company and Allied Matters Act (CAMA)
2020
The
Companies and Allied Matters Act, 2020 serves as the principal legislation
governing the formation, operation, and dissolution of companies,[1] including
SPVs, in Nigeria. Under CAMA 2020, an SPV is usually registered as a private
limited liability company or, in some cases, a public limited company,[2] depending
on the scope and financing requirements of the project.The choice of legal
structure depends on the nature of the project and the funding requirements.
CAMA 2020 stipulates that an SPV must have a memorandum and articles of
association defining its specific purpose, objectives, and governance
structure.[3] The law
also mandates proper corporate governance practices, including the appointment
of directors[4], details
of shareholders, and company secretary,[5]
proof of registered office address, compliance with financial reporting
requirements, [6]and
adherence to transparency and accountability standards. Additionally, CAMA 2020
provides for the protection of creditors and investors by ensuring that SPVs
maintain adequate financial disclosure and adhere to insolvency provisions to
mitigate financial risks.
Once
incorporated, an SPV must maintain statutory compliance by filing annual
returns, keeping[7] proper
financial records, and adhering to corporate governance principles as
stipulated under CAMA 2020. Corporate governance requirements include
transparency in financial reporting, adherence to the duties and
responsibilities of directors, and ensuring shareholder rights are protected.
SPVs must also comply with tax obligations under the Federal Inland Revenue
Service (FIRS) regulations, which include value-added tax (VAT), company income
tax (CIT), and withholding tax requirements.
The
SPV must be registered with the Corporate Affairs Commission (CAC) and adhere
to corporate governance standards, including the appointment of at least one
director for a private company and three for a public company.[8]
Additionally,
the SPV must maintain statutory records, such as registers of members,
directors, and secretaries (where applicable), and file annual returns with the
CAC.[9] Compliance
with financial reporting obligations, including the auditing and filing of
financial statements, is mandatory, particularly for public SPVs.[10]
Furthermore, the SPV must ensure that its name reservation, share capital
structure, and business objectives align with regulatory expectations to avoid
sanctions or dissolution.[11]
A
private limited liability SPV is restricted from inviting the public to
subscribe to its shares and must have a minimum of one shareholders and one
director.[12] In
contrast, a public limited SPV must have more shareholders, directors, a
company secretary, and a minimum share capital as prescribed by regulatory
bodies.[13] Public
SPVs must also comply with stricter disclosure and corporate governance
requirements under the Nigerian Code of Corporate Governance.[14]
Typically,
in Nigeria, persons involved in projects opt for entities known as Special
Purpose Vehicles (SPV) through which such projects may be executed. These SPVs
may either be incorporated or unincorporated companies but there is a
preference for incorporated SPVs due to the legal benefits attached. The Companies
and Allied Matters Act, 2020 (CAMA) is the principal legislation for the
formation and management of Companies in Nigeria. The CAMA provides for the
capacity to form a company, types of companies and other corporate
organisations including Incorporated Trustees and Limited Liability
Partnerships. Further provisions cover the types of companies, and the
management of companies including Directors, Meetings, Minority Protection and
Corporate Restructuring among other requirements.
Under
the CAMA SPVs are required to be established either as public companies or
private companies. It provides for three different types of companies each of
which may either be a public company or a private company.[15]
They are-
(a)
Public company limited by
Shares;
(b)
Private company limited by
Shares;
(c)
Public company limited by
Guarantee;
(d)
Private company limited by
Guarantee;
(e)
Public unlimited Company;
and
(f)
Private Unlimited Company.
Below
are some of the requirements for establishing and managing an SPV-
(i)
Two or more persons (individual
or legal entities) are empowered to form a public company as an SPV or a single
person where the SPV is to be a private company. However, regardless of the
type of the company, the purpose to be pursued upon incorporation must be a
lawful one,[16]
(ii)
Where an individual is to
join in the formation of a company, he or she should have attained 18 years if
two other persons involved in the formation have not attained 18 years. They
are required to be of sound mind and financial standing,
(iii)
A memorandum of association
of the company mentioning the name, nature of the business, type of company,
registered office address, amount of share capital (minimum of N100,000 and
2,000,000 for a private or public company respectively) and particulars of
subscribers,[17]
(iv)
Articles of Association to be contained in a
single document and divided into numbered paragraphs which may include any
restriction as to the object of the company,
(v)
Particulars of directors and
a secretary for public companies or a director for a private company,
(vi)
Exemption considerations for
foreign companies that may be part of the SPVs along with work and residence
permits for expatriate officers of the foreign companies,[18]
and
(vii)
Corporate governance
considerations for public companies particularly the appointment of directors
and separation of the office of the Managing Director/CEO and the Chairman of
Board of Directors, meetings of companies, and financial reporting
requirements.
It
is important to observe at this point that aside from CAMA, the Investments and
Securities Act 2025, capital market Regulations and Codes provides other
requirements for public companies seeking listing on the Nigerian Stock
Exchange (NSE) regarding inviting the members of the public to purchase their
securities.
Sectoral
Regulations For SPVs-PPPs In Infrastructure Deployment
This
section will briefly examine the sectorial regulations for use of SPV’s in
infrastructure deployment and establishment of SPVs under a PPP framework
Specific
sector requirements under the ICRC Act, 2005 as a PPP Structured SPV: -
One
of the primary goals of Government is to provide basic social amenities, public
infrastructure and utilities for its citizenry. However, the constraints of
funds and the evidence of private sector contribution to public infrastructure
development has given birth to the concept of Public Private Partnership (PPP).
Through PPP, the Government is able to enter into a contractual relationship on
agreed terms and conditions with a private company to provide specific basic
public infrastructure and leverage on opportunities to attract private
expertise or capital, increase efficiency, utilise available resources to
provide needed public infrastructure and introduce sectoral reforms.
In
Nigeria, PPP is regulated principally by the Infrastructure Concession
Regulatory Commission (Establishment, etc.) Act, 2005 (ICRC Act). The ICRC Act
established the Infrastructure Concession Regulatory Commission (ICRC) to
regulate, monitor and supervise infrastructure and development projects.[19] The ICRC
Act was enacted to facilitate the participation of the private sector in
financing the development, operation, or maintenance of infrastructure or
development projects of the federal government through concession or
contractual arrangements,[20] it
applies only to investment and development projects relating to any
infrastructure of the Federal Government MDAs.[21]
Aside from being regulated primarily by the ICRC Act, SPVs which are structured as PPP
projects in Nigeria are additionally
regulated by sector-specific laws depending on the sector. Most relevant to
this paper is the Nigeria Communications Act, 2003.
The
ICRC Act stipulates the following requirements for an SPV structured a PPP-
(a)
prioritisation of
infrastructure projects by relevant Ministry, Department or Agency (MDA) to be
submitted to the Federal Executive Council (FEC) for approval as concession
projects;[22]
(b)
vetting the financial
capacity, expertise and experience of the Project Proponent in undertaking such
infrastructural project;[23]
(c)
publication of projects that
are eligible for concession in the national gazette and in at least
three national dailies with wide circulation;[24]
(d)
upon approval by the FEC,
the relevant MDA invites open competitive public bidding for the approved
priority projects by publication in at least three national newspapers having
wide circulation in Nigeria;[25]
(e)
award of concession to be
only to the bidder whose bid satisfied the pre-qualification criteria and is
the most technically and economically comprehensive;[26]
(f)
preparation and execution of
concession contract to cover-
(i) duration
of the concession,[27]
(ii) where
the awardee is a consortium, joint liability of all members of the consortium,
(iii) amount
and period for payment to the government,[28]
(iv) amortisation
plan for repayment of the project cost,[29]
(v) the
special account into which shall be paid all monies accruing to the government,[30]
(vi) the
power of the ICRC and the relevant MDA to inspect any asset under the project,[31] and
(vii)
the supremacy of provisions
of the ICRC Act;
(g)
the relevant MDA shall authenticate
the project cost and any other relevant professional body;[32]
(h)
insuring the concession
project by the contractor or project-proponent as approved by NAICOM;[33]
(i)
the relevant MDA is
responsible for the supervision of the concession project;[34]
and
(j)
grant of such right of way
to the contractor as may be necessary or reasonable for the execution of the
concession project.[35]
SPVs
in Public-Private Partnerships and the ICRC Act: -
SPVs play a significant role in infrastructure development and PPP
arrangements, particularly under the Infrastructure Concession Regulatory
Commission Act, 2005 (ICRC Act). [36]The ICRC
Act provides the legal framework for private sector participation in public
infrastructure projects through concession agreements, build-operate-transfer
(BOT) arrangements, and other partnership models.[37]
These arrangements are essential in bridging the infrastructure deficit in
Nigeria by leveraging private sector expertise and financing for critical
projects such as roads, railways, airports, and energy facilities.
Under
the ICRC Act, an SPV established for a PPP project must be structured to ensure
risk allocation between the public and private sectors while maintaining
financial sustainability. This requires a clear delineation of
responsibilities, with the government typically assuming regulatory oversight
and policy direction while the private sector partner focuses on project
execution, funding, and operational efficiency. The regulatory requirements
include obtaining approval from relevant government agencies, compliance with
procurement laws, and adherence to contractual obligations under the PPP
agreement.
The
ICRC Act further mandates that SPVs in PPP projects meet financial viability
tests, maintain proper project governance structures, and ensure operational
efficiency. Financial viability assessments are conducted to determine whether
the project can generate sufficient revenue streams to cover operational costs
and deliver expected returns to investors. [38]This
ensures that PPP projects remain commercially sustainable while fulfilling
public service obligations.
Regulatory
and Compliance Requirements for SPVs in PPPs: -The
establishment of an SPV under a PPP framework involves a rigorous regulatory
approval process. Before commencement, the project must undergo an extensive
feasibility study, which assesses technical, financial, legal, and
socio-economic viability. This study serves as the basis for obtaining
approvals from relevant government bodies, including the Federal Executive
Council (FEC) for large-scale projects or the respective state government
authorities for subnational initiatives.[39]
Furthermore,
SPVs engaged in PPP projects must comply with Nigeria’s public procurement
regulations, including the Public Procurement Act, 2007.[40]
This law mandates transparency, competition, and fairness in the bidding and
contracting process for infrastructure projects. SPVs must also adhere to
performance monitoring mechanisms established by the ICRC, which include
periodic reporting, financial audits, and operational reviews to ensure
compliance with contractual terms. Another key requirement under the ICRC Act
is the establishment of governance structures that promote accountability and
efficient decision-making within the SPV. This involves setting up a board of directors with representation from
both public and private sector stakeholders, appointing experienced management
teams, and ensuring that governance frameworks align with international best
practices. Additionally, SPVs in PPP projects must adhere to environmental,
social, and sustainability requirements. These include conducting Environmental
and Social Impact Assessments (ESIAs) to mitigate potential negative effects on
local communities and the environment. Compliance with these requirements is crucial
in maintaining public trust and securing long-term project success.
The
role of SPVs in Nigeria’s infrastructure development through PPPs is crucial in
addressing funding gaps and ensuring efficient project execution. The legal and
regulatory framework provided by the ICRC Act establishes a structured approach
to risk allocation, financial sustainability, and governance in PPP projects.
Compliance with regulatory requirements, including obtaining necessary
approvals, adhering to procurement laws, and maintaining sound governance
structures, is essential for the successful operation of SPVs in PPP
arrangements. By aligning with these legal provisions, SPVs can contribute
significantly to Nigeria’s economic growth by facilitating sustainable
infrastructure development and public service delivery.
Investment and Securities
Act (ISA) 2025
The
ISA 2025 repeals the 2007 Act and introduces transformative reforms for
Nigeria’s capital markets, with direct implications for ICT/digital
infrastructure financing.
Key Provisions of ISA 2025
and ICT Sector Implications
The
ISA 2025 introduces transformative reforms with three key provisions impacting
Nigeria's digital economy. First, it formally recognizes digital assets as
securities, bringing cryptocurrencies, asset-backed tokens (like fibre optic
bonds), and STOs under SEC regulation, replacing the CBN's restrictive
approach. Second, it modernizes financial market infrastructure by legitimizing
blockchain trading platforms for telecom assets and enabling smart contracts
for ICT PPPs. Third, it strengthens investor protections through stricter
disclosure requirements for tech startups and mandatory cyber-risk reporting
for listed ICT firms, aligning with Nigeria's Data Protection Act.
These
changes create significant opportunities for Nigeria's ICT sector. The Act
unlocks new financing mechanisms, allowing infrastructure SPVs to issue
blockchain-based digital securities and liberalizing crowdfunding for rural
broadband projects. Telecom giants like MTN and Airtel can now securitize fibre
assets, while states may fund smart city initiatives through digital bonds.
However, challenges remain, including potential regulatory overlaps between
SEC, CBN and NCC, and unresolved tax treatment of digital asset transactions.
To
maximize benefits, stakeholders should adopt strategic approaches. Regulators
must harmonize digital asset rules across agencies and establish fintech
sandboxes. Telecom operators should explore asset tokenization and
SEC-compliant crowdfunding. Investors and startups should closely monitor
upcoming SEC guidelines while utilizing smart contracts for transparent deals.
These coordinated efforts will determine how effectively Nigeria harnesses ISA
2025 to accelerate its digital transformation while managing associated risks.
Regulatory and Tax
Compliance
SPVs
must obtain necessary sector-specific licenses, particularly if operating in
regulated industries such as finance, energy, or infrastructure. Tax compliance
under the Companies Income Tax Act (CITA) and Value Added Tax (VAT) Act is
essential, including timely remittance of taxes and filing returns with the
Federal Inland Revenue Service.[41]
Additionally, SPVs involved in cross-border transactions must comply with
Foreign Exchange (Monitoring & Miscellaneous Provisions) Act and Central
Bank of Nigeria (CBN) regulations.
Finally,
establishing and managing an SPV in Nigeria requires strict adherence to CAMA
2020, sector-specific regulations, and tax laws. While private SPVs benefit
from fewer regulatory burdens, public SPVs face stricter governance and
reporting obligations. Proper structuring, compliance, and corporate governance
are critical to ensuring the SPV’s legality and operational efficiency.
EXAMPLES
OF SPV EXPERIENCE IN NIGERIA
Electric
Power Cable Infrastructure Deployment
In
the power sector, SPVs have been instrumental in facilitating large-scale
infrastructure projects. A notable example is the Lagos-Ibadan Transmission
Line Project, where an SPV was established to manage the financing and deployment
of high-capacity transmission cables. This project, backed by a consortium of
local and international investors, aimed to improve electricity supply between
Lagos and Ibadan. The SPV structure allowed for risk isolation, ensuring that
the project's financial obligations were separate from the parent companies.
Additionally, the Azura-Edo Power Plant utilized an SPV to secure project
financing and manage the construction of a 450MW gas-fired power plant. The SPV
model enabled the project to attract foreign investment and adhere to
regulatory requirements, demonstrating its effectiveness in Nigeria's power
sector.
Oil
and Gas, Banking, Finance, and Capital Markets/Insurance
In
the oil and gas sector, SPVs have been widely used for joint ventures and
project financing. For instance, the Egina Floating Production Storage and
Offloading (FPSO) Project, operated by TotalEnergies, involved an SPV to manage
the financing and operational risks associated with the deepwater oil field.
The SPV structure ensured that the project's liabilities were ring-fenced,
protecting the parent company's balance sheet. In the banking and capital
markets sector, SPVs have been utilized for securitization and structured
finance. For example, United Bank for Africa (UBA) and Access Bank have used
SPVs to issue asset-backed securities (ABS) and mortgage-backed securities
(MBS), enabling them to unlock liquidity from illiquid assets. Similarly, in
the insurance sector, SPVs have been employed for catastrophe bonds and risk
transfer mechanisms, such as the Nigerian Agricultural Insurance Corporation
(NAIC), which used an SPV to manage risks associated with agricultural
insurance portfolios.
Construction
(Transport: Road, Rail, Water/Maritime, Air) and Real Estate
In
the construction and transport sectors, SPVs have played a critical role in
public-private partnerships (PPPs). The Lagos-Ibadan Expressway project,
managed by an SPV, involved collaboration between the federal government and
private investors to upgrade the critical transport corridor. [42]
The Lekki Toll Gate is operated as a Special Purpose Vehicle (SPV)
under the Lekki Concession Company Limited (LCC).Also,the LCC was
established as an SPV to finance, develop, operate, and maintain the Lekki-Epe
Expressway and the Lekki-Ikoyi Link Bridge under a Public-Private
Partnership (PPP) agreement with the Lagos State Government. The SPV model
allowed LCC to raise funds for the construction and maintenance of the road
infrastructure while generating revenue through toll collection.[43]
Similarly,
the Abuja Light Rail Project utilized an SPV to oversee financing,
construction, and operations, ensuring that the project remained
bankruptcy-remote and financially viable.[44] In the
maritime sector, the Lekki Deep Sea Port project, developed through an SPV,
attracted significant foreign investment and streamlined the construction
process. In real estate, SPVs have been used for large-scale developments, such
as the Eko Atlantic City project, where an SPV was established to manage the
financing and construction of the multi-billion-dollar city reclamation
project. These examples highlight the versatility of SPVs in addressing complex
infrastructure and real estate challenges in
Nigeria.[45]
Asset
Management Corporation of Nigeria (AMCON)
While
AMCON is not explicitly labeled as an SPV, it operates in a manner similar to
one. AMCON was established to address the non-performing loan (NPL) crisis in
Nigeria's banking sector by acquiring bad debts from banks and managing them
separately. This isolation of assets (non-performing loans) from the banks'
balance sheets is a key characteristic of SPVs. By acting as a quasi-SPV, AMCON
helps stabilize the financial system, protects banks from insolvency risks, and
ensures that the acquired assets are managed and resolved efficiently. Its role
in securitizing and restructuring distressed assets aligns with the core
functions of an SPV, even though it operates on a larger, government-backed scale.[46]
RMB
Nigeria Issuance SPV PLC
This
is a classic example of an SPV used in the banking and capital markets sector.
RMB Nigeria Issuance SPV PLC was incorporated specifically to facilitate
fundraising activities for RMB Nigeria through the issuance of debt securities
in the public capital markets. The SPV structure allows RMB Nigeria to isolate
the risks associated with the debt issuance, ensuring that the parent company's
balance sheet remains unaffected. This SPV is a clear demonstration of how SPVs
are used in structured finance to raise capital, enhance creditworthiness, and
comply with regulatory requirements. It also highlights the role of SPVs in
enabling financial institutions to access long-term funding for business
expansion and development.
Freezone
Global Investments Ltd (OGFZA's SPV)
Freezone
Global Investments Ltd is the investment subsidiary of the Oil and Gas Free
Zones Authority Nigeria (OGFZA). As an SPV, it is specifically designed to
manage investments and projects within Nigeria's oil and gas free zones. The
SPV structure allows OGFZA to isolate financial and operational risks
associated with these investments, ensuring that the parent organization
(OGFZA) is not directly exposed to liabilities. This SPV plays a critical role
in attracting foreign direct investment (FDI) into Nigeria's oil and gas sector
by providing a secure and regulated framework for investors. It also
facilitates the development of infrastructure and industrial projects within
the free zones, contributing to economic growth and job creation.
These
examples—AMCON, RMB Nigeria Issuance SPV PLC, and Freezone Global Investments
Ltd—demonstrate the diverse applications of SPVs in Nigeria across banking,
capital markets, and the oil and gas sector. Each entity serves a specific
purpose, such as managing non-performing loans, raising capital, or
facilitating investments, while maintaining risk isolation and regulatory
compliance. These examples highlight the versatility and importance of SPVs in
Nigeria's economic landscape.
SPVs
for Mining Sector (Federal Government Initiative)
The
article[47] from
BusinessDay highlights the Federal Government's creation of Special Purpose
Vehicles (SPVs) to boost state participation in mining activities. These SPVs
are designed to facilitate joint ventures between the federal government, state
governments, and private investors in the mining sector. The SPV structure
allows for risk-sharing, efficient resource allocation, and regulatory
compliance while ensuring that the financial and operational risks associated
with mining projects are isolated from the participating entities. This
initiative aims to unlock the potential of Nigeria's solid minerals sector,
attract investment, and promote economic diversification. The use of SPVs in
this context demonstrates their role in public-private partnerships (PPPs) and sector-specific
development projects.
Sukuk
SPVs under the Securities and Exchange Commission (SEC)
The
sukuk (Islamic bond) transactions facilitated by SPVs are another excellent
example. The Securities and Exchange Commission (SEC) oversees sukuk issuances
in Nigeria, which are often structured through SPVs to ensure compliance with
Islamic finance principles. For instance, the Nigeria Sovereign Sukuk issued by
the federal government for infrastructure development is managed through an
SPV. This SPV issues the sukuk, manages the funds raised, and oversees the
construction of infrastructure projects such as roads, bridges, and other
public utilities. The SPV structure ensures that the funds are ring-fenced and
used exclusively for the intended projects, providing transparency and
accountability to investors. This example also ties into the construction
sector, as the proceeds from sukuk issuances are typically used to finance
large-scale infrastructure projects.[48]
Sukuk
SPVs for Construction Sector
The
sukuk SPVs are particularly relevant to the construction sector, as they are
often used to finance critical infrastructure projects. For example, the N100
billion Sukuk Issuance by the federal government in 2017 was managed through an
SPV and allocated to the construction and rehabilitation of 25 major road
projects across Nigeria. The SPV structure ensures that the funds are
bankruptcy-remote and protected from the financial risks of the issuing entity
(in this case, the federal government). This model has been replicated in
subsequent sukuk issuances, demonstrating the effectiveness of SPVs in
mobilizing long-term capital for infrastructure development. The sukuk SPVs
also align with global best practices in Islamic finance, making them
attractive to both domestic and international investors.
SPV-Public-Private
Partnership (PPP) Model
The PPP model involves collaboration between
government agencies and private sector companies. This model can leverage
private investment and expertise while maintaining public oversight. The PPP
structure could be designed as a Build-Operate-Transfer (BOT) or
Build-Own-Operate (BOO) agreement[49]
a) Advantages: Access to private financing, shared risks,
and expertise in operations.
b) Challenges: Potential for conflicts of interest and complex
negotiation processes.
c) Strategic
risk management is critical in mitigating potential challenges such as
regulatory changes, financing hurdles, and operational delays. Developing a
comprehensive risk management framework that includes contingency planning will
be vital for the SPV’s success.[50]
Nigeria
Liquefied Natural Gas (NLNG)
a) Established in 1989 to harness Nigeria's natural gas
resources.
b) Operates under the Nigerian Gas Master Plan and
relevant laws, including the NLNG Act as a limited liability company jointly
owned by four shareholders; the Federal Government of Nigeria represented by
NNPC Ltd (49%), Shell (25.6%), Total Energies (15%), and Eni (10.4%). The
Private Sector own 51% of the Shares of NLNG.
c) Governed by contracts with the Nigerian government and
international partners.
d) Regulatory
Compliance: NLNG operates within the framework of Nigerian laws, adhering to
regulations from government bodies, including the Department of Petroleum
Resources (DPR) and the Nigerian Content Development and Monitoring Board
(NCDMB).
Nigeria
Inter-Bank Settlement System PLC (NIBSS):
NIBSS provides a shared interbank payment
infrastructure to facilitate electronic interbank funds transfers and
settlements
The Current Governing
Structure of NIBSS (Nigeria Inter-Bank Settlement System) includes: -
a) Shareholders: NIBSS is owned by banks operating in
Nigeria, with shares distributed among commercial and development banks which
play a crucial role in Nigeria's payment systems.
b) Board of Directors: Similar to NLNG, NIBSS has a Board
responsible for governance, with representatives from member banks and
independent directors to provide oversight and strategic direction.
c) Executive Management: The day-to-day operations and
implementation of strategies are led by a Managing Director/CEO, supported by
an executive management team focused on technology, finance, operations, and
stakeholder relations.
d) Committees: NIBSS has various committees (e.g., audit,
risk management) to handle specific governance functions, ensuring adherence to
regulatory requirements and operational efficiency.
e) Regulatory Oversight: NIBSS is overseen by the Central
Bank of Nigeria (CBN), ensuring it complies with national regulations governing
the payment systems and financial transactions.
NIBSS
significantly contributes to financial inclusion in Nigeria by enhancing the
payments infrastructure, reducing transaction costs, facilitating
interoperability, and promoting financial literacy. By fostering an environment
where digital financial services are accessible to all, NIBSS helps integrate
more individuals and businesses into the formal financial system, ultimately
leading to economic growth and development.
REGULATORY GAPS
Lack of a Dedicated SPV
Regulation
While
SPVs operate under the Companies and Allied Matters Act (CAMA) 2020, no
specific regulatory framework comprehensively governs their establishment,
operation, and dissolution. Unlike some jurisdictions that have stand-alone SPV
laws, Nigeria relies on general corporate and financial regulations, which may
not adequately address the unique risks associated with SPVs, such as asset
isolation, bankruptcy remoteness, and regulatory oversight. A dedicated SPV
regulation could clarify the permissible structures, minimum capitalisation,
and reporting requirements for various SPVs, including those used in
securitisation, public-private partnerships (PPPs), and project finance.
Unclear Tax Treatment and
Incentives
Nigeria's
tax laws, particularly the Companies Income Tax Act (CITA) and Value Added Tax
(VAT) Act do not provide explicit tax incentives or exemptions tailored for
SPVs. In other jurisdictions, SPVs used for infrastructure financing or
securitisation benefit from tax neutrality provisions that prevent double
taxation or excessive tax burdens on asset transfers, interest payments, and
dividend distributions. The absence of precise tax treatment for SPVs in
Nigeria increases transaction costs and discourages widespread adoption.
Addressing this gap through specific tax incentives would enhance their
viability, particularly for capital market transactions and infrastructure
development.
Insolvency and Bankruptcy
Protection Limitations
Although
CAMA 2020 provides for corporate insolvency, it lacks explicit provisions on
the bankruptcy remoteness of SPVs. In structured finance, isolating SPV assets
from the bankruptcy of the Sponsor or Originator is crucial to ensuring
investor confidence. While Nigerian courts may recognise the principle of
actual sale in asset-backed transactions, no statutory safeguard prevents
creditors from claiming SPV-held assets in insolvency proceedings.
Strengthening legal protections around bankruptcy remoteness would enhance the
attractiveness of Nigerian SPVs in international financial markets.
Regulatory Overlap and Fragmentation
SPVs
in Nigeria may fall under multiple regulatory bodies, including the Securities
and Exchange Commission (SEC), the Central Bank of Nigeria (CBN), the Nigerian
Stock Exchange (NSE), and the Infrastructure Concession Regulatory Commission
(ICRC) for PPP-related SPVs. This fragmented regulatory environment creates
compliance burdens and uncertainties, as different agencies may impose
conflicting or overlapping requirements. A streamlined regulatory framework,
possibly under a unified SPV law or guidelines, would improve regulatory
efficiency and reduce bureaucratic bottlenecks.
Lack of Investor Protection
and Governance Standards
There
are limited governance and investor protection mechanisms specific to SPVs in
Nigeria. Unlike in jurisdictions where SPVs are subject to strict governance
rules to ensure transparency and fiduciary responsibility, Nigeria relies on
general corporate governance rules under CAMA, which may not be sufficient for
entities handling large-scale securitisation or infrastructure projects.
Enhancing governance requirements, such as independent directorship, mandatory
disclosures, and investor protection mechanisms, would improve SPV's
credibility and facilitate capital market participation.
CHALLENGES
The
establishment and management of Special Purpose Vehicles (SPVs) in Nigeria are
governed by a complex legislative and regulatory requirements framework. While
these requirements are designed to ensure transparency, accountability, and
investor protection, they also present several challenges that can hinder the
effective use of SPVs in structured finance, securitisation, and public-private
partnerships (PPPs). Below is an analysis of the general challenges associated
with these requirements:
Regulatory Fragmentation and
Overlap
One
of the primary challenges in establishing and managing SPVs is the
fragmentation and overlap of regulatory frameworks. SPVs are subject to
multiple laws and regulations, including the Companies and Allied Matters Act
(CAMA) 2020, the Securities and Exchange Commission (SEC) Rules, the Central
Bank of Nigeria (CBN) Guidelines, and sector-specific regulations such as the
Infrastructure Concession Regulatory Commission (ICRC) Act. This multiplicity
of regulations often leads to conflicting requirements, creating confusion for
SPV managers and increasing compliance costs. For example, an SPV involved in
securitisation may need to comply with both the CBN's risk retention rules and
the SEC's disclosure requirements, which may not always align.[51]
Complexity of Compliance
Requirements
The
legislative and regulatory requirements for SPVs are often highly complex and
technical, posing significant challenges to compliance. For instance, Section
40(1) of CAMA 2020 requires SPVs to maintain detailed records of their financial
transactions, while Section 156 of the CBN Guidelines on Securitization imposes
additional reporting obligations on SPVs issuing asset-backed securities. These
requirements demand specialised accounting, law, and risk management knowledge,
which may not always be readily available within the SPV's management team. The
complexity of these requirements can lead to errors in compliance, exposing
SPVs to regulatory penalties and reputational risks.[52]
High Cost of Compliance
The
cost of complying with legislative and regulatory requirements is another
significant challenge for SPVs. Establishing an SPV involves significant legal,
administrative, and financial costs, including registration fees, licensing
fees, and the cost of engaging legal and financial advisors. Additionally,
ongoing compliance requirements, such as filing annual returns, preparing
audited financial statements, and submitting periodic reports to regulatory
authorities, further increase the financial burden on SPVs. These costs can be
particularly prohibitive for smaller SPVs or those involved in low-value
transactions, limiting their ability to participate in structured finance and
securitisation activities.[53]
Inconsistent Enforcement of
Regulations
Another
challenge for SPVs in Nigeria is the inconsistent enforcement of regulations by
regulatory authorities. While the legislative and regulatory frameworks provide
clear guidelines for establishing and managing SPVs, enforcing these guidelines
often varies across different regulatory bodies. For example, the SEC may
impose strict penalties for non-compliance with disclosure requirements, while
the CBN may adopt a more lenient approach to enforcing risk retention rules.
This inconsistency creates uncertainty for SPV managers and undermines the effectiveness
of the regulatory framework.[54]
Limited Capacity of
Regulatory Authorities
The
limited capacity of regulatory authorities to effectively oversee SPVs is
another significant challenge. Regulatory bodies such as the SEC, CBN, and ICRC
often lack the resources, expertise, and infrastructure e needed to monitor and
enforce compliance with legislative and regulatory requirements. This
limitation can result in delays in the approval of SPV transactions, inadequate
oversight of SPV operations, and a lack of timely intervention in cases of
non-compliance. The limited capacity of regulatory authorities also hinders
their ability to provide guidance and support to SPV managers, further
exacerbating compliance challenges.[55]
Taxation Challenges
Taxation
is another area of concern for SPVs in Nigeria. While Section 29(8) of the
Companies Income Tax Act (CITA) provides exemptions for SPVs engaged in
qualifying securitisation transactions, the application of these exemptions is
often inconsistent and subject to interpretation by tax authorities.
Additionally, SPVs must comply with withholding tax obligations under Section
10(1) of CITA, which can create administrative burdens and increase the cost of
transactions. The lack of clarity in tax regulations and the potential for
double taxation further complicate the tax compliance process for SPVs.[56]
Lack of Awareness and
Expertise
Many
stakeholders, including SPV managers, investors, and regulatory authorities,
lack awareness of the legislative and regulatory requirements for SPVs. This
lack of awareness often results in non-compliance, errors in establishing and
managing SPVs, and disputes between stakeholders. Additionally, there is a
shortage of expertise in structured finance, securitisation, and SPV management
in Nigeria, further limiting the ability of SPVs to comply with regulatory
requirements and achieve their objectives.[57]
Dispute Resolution
Mechanisms
Another
challenge is the lack of effective dispute resolution mechanisms for SPVs.
While Section 18(4) of the ICRC Act provides for establishing dispute
resolution mechanisms in PPPs, these mechanisms are often underutilised or
ineffective. Disputes between SPVs, originators, investors, and regulatory
authorities can lead to delays in project implementation, increased costs, and
reputational damage. The absence of a robust dispute resolution framework
undermines investor confidence and hinders the growth of the SPV market in
Nigeria.[58]
CONCLUSION
Establishing
and managing Special Purpose Vehicles (SPVs) in Nigeria play a pivotal role in
driving structured finance, securitisation, and public-private partnerships
(PPPs), all of which are essential for economic growth and infrastructure
development. However, the current legislative and regulatory landscape presents
significant challenges, including regulatory fragmentation, high compliance
costs, inconsistent enforcement, and limited capacity of regulatory
authorities. These challenges hinder the effective use of SPVs and limit their
potential to contribute to Nigeria's economic transformation.
Addressing
these challenges requires a coordinated and multi-faceted approach.
Streamlining regulatory frameworks, simplifying compliance requirements,
reducing costs, and enhancing enforcement mechanisms are critical steps toward creating
a conducive environment for SPVs. Additionally, building awareness and
expertise, improving tax clarity, strengthening dispute resolution mechanisms,
and leveraging technology will further enhance the efficiency and transparency
of SPV operations. Public-private collaboration and investor
confidence-building measures will also play a crucial role in unlocking the
full potential of SPVs to mobilise capital, drive infrastructure development,
and foster financial innovation.
By
implementing these recommendations, Nigeria can overcome the existing barriers
and position itself as a hub for structured finance and securitisation in
Africa. A well-regulated and efficiently managed SPV market will attract
domestic and foreign investment and support sustainable economic growth, job
creation, and improved service delivery in critical sectors. Ultimately, the
success of SPVs in Nigeria will depend on the commitment of policymakers,
regulatory authorities, and industry stakeholders to work together to create a robust
and resilient financial ecosystem.
RECOMMENDATIONS
A
multi-faceted approach is required to address the challenges associated with
Nigeria's legislative and regulatory requirements for Special Purpose Vehicles
(SPVs). This approach should streamline regulations, enhance enforcement
mechanisms, build capacity, and foster stakeholder collaboration. Below are
specific recommendations to improve the establishment and management of SPVs in
Nigeria:
Streamline Regulatory
Frameworks
Harmonize
Laws and Regulations: The government should establish a task force to harmonise
the various laws and regulations governing SPVs, such as the Companies and
Allied Matters Act (CAMA) 2020, the Securities and Exchange Commission (SEC)
Rules, and the Central Bank of Nigeria (CBN) Guidelines. This task force should
eliminate overlaps, resolve conflicts, and create a unified regulatory
framework for SPVs. Develop a Single Regulatory Body: Consider creating a
single regulatory body or a dedicated unit within an existing agency (e.g., SEC
or CBN) to oversee all SPV-related activities. This would reduce fragmentation
and ensure consistent enforcement of regulations.
Simplify Compliance
Requirements
Standardise
Reporting Templates: Regulatory authorities should develop standardised reporting
templates for SPVs to simplify compliance with disclosure and reporting
requirements. These templates should be user-friendly and tailored to the
specific needs of SPVs involved in securitisation, structured finance, and
PPPs. Provide Clear Guidelines: Regulatory bodies should issue clear and
detailed guidelines on establishing and managing SPVs, including step-by-step
instructions for compliance with legal and regulatory requirements. These
guidelines should be regularly updated to reflect changes in the regulatory
environment.
Reduce Compliance Costs
Introduce
Fee Waivers or Reductions: To encourage the use of SPVs, especially for small
and medium-sized enterprises (SMEs), the government should consider introducing
fee waivers or reductions for SPV registration, licensing, and annual returns.
Promote Digital Platforms: Regulatory authorities should invest in digital
platforms to submit compliance documents and pay fees. This would reduce
administrative burdens and lower compliance costs for SPVs.
Enhance Enforcement
Mechanisms
Strengthen
Regulatory Capacity: Regulatory authorities such as the SEC, CBN, and ICRC
should be provided with additional resources, including funding, personnel, and
training, to enhance their capacity to monitor and enforce compliance with SPV
regulations. Impose Stiffer Penalties for Non-Compliance: Regulatory
authorities should impose stiffer penalties for violations of SPV regulations
to deter non-compliance. These penalties should be proportionate to the
severity of the violation and consistently enforced.
Improve Tax Clarity and
Efficiency
Clarify
Tax Exemptions: The Federal Inland Revenue Service (FIRS) should issue clear
guidelines on the application of tax exemptions for SPVs under Section 29(8) of
the Companies Income Tax Act (CITA). This would reduce uncertainty and disputes
over tax obligations. Avoid Double Taxation: The government should review the
tax treatment of SPVs to eliminate instances of double taxation, particularly
in cross-border transactions involving foreign investors.
Build Awareness and
Expertise
Conduct
Training Programs: Regulatory authorities, in collaboration with industry
associations, should conduct training programs for SPV managers, investors, and
other stakeholders on the legal and regulatory requirements for SPVs. These
programs should cover corporate governance, risk management, and compliance
topics. Promote Knowledge Sharing: Establish platforms for knowledge sharing
and best practices among SPV stakeholders, such as annual conferences, webinars,
and online forums. This would help build expertise and foster collaboration in
the SPV market.
Strengthen Dispute
Resolution Mechanisms
Establish
Specialised Tribunals: The government should establish specialised tribunals or
arbitration centres to handle disputes involving SPVs. These tribunals should
have the expertise to resolve complex issues related to securitisation,
structured finance, and PPPs. Encourage Alternative Dispute Resolution (ADR):
Promote ADR mechanisms, such as mediation and arbitration, to resolve disputes
involving SPVs. ADR is often faster and less costly than litigation, making it
an attractive option for stakeholders.
Promote Investor Confidence
Enhance
Transparency: Regulatory authorities should enforce strict transparency requirements
for SPVs, including publishing audited financial statements, transaction
details, and risk assessments. This would enhance investor confidence and
attract more capital to the SPV market. Introduce Investor Protection Measures:
Develop and implement investor protection measures, such as mandatory risk
disclosures, credit ratings for asset-backed securities, and insurance for SPV
transactions. These measures would reduce the risks associated with investing
in SPVs.
Leverage Technology for
Compliance and Monitoring
Adopt
RegTech Solutions: Encourage using regulatory technology (RegTech) solutions to
automate compliance processes, such as reporting, record-keeping, and risk
monitoring. This would reduce the administrative burden on SPVs and improve the
efficiency of regulatory oversight. Implement Blockchain Technology: Explore
the use of blockchain technology to enhance transparency and traceability in
SPV transactions. Blockchain can provide a secure and immutable record of
transactions, reducing the risk of fraud and improving stakeholder trust.
Foster Public-Private
Collaboration
Encourage
Stakeholder Engagement: Regulatory authorities should engage with industry
stakeholders, including SPV managers, investors, and legal and financial
advisors, to identify challenges and develop solutions. This collaborative
approach would ensure that regulations are practical and effective. Promote
PPPs for Infrastructure Development: The government should actively promote
using SPVs in PPPs for infrastructure development. This would involve providing
incentives, such as tax breaks and guarantees, to attract private sector
participation in infrastructure projects.
[1] Damilola
Bamisile, A Critical Analysis of the Company and Allied Matters Act 2020- The
Latest Development <https://www.aaachambers.com> accessed 28 March 2025.
[2] Companies and Allied Matters Act, 2020, Sections 22
and 24
[3] Companies and Allied Matters Act, 2020, Sections 7
and 33
[4] Companies and Allied Matters Act, 2020, section 247
[5] Companies and Allied Matters Act, 2020, Section 293
[6] Companies and Allied Matters Act, 2020, Section 331
[7] Companies and Allied Matters Act, 2020, Sections
370 and 371
[8] Section 271 of CAMA 2020.
[9] Sections 417-425 of CAMA.
[10] Sections 379 of CAMA 2020.
[11] Section 41 & 868 of CAMA 2020
[12] Section 18(2) of CAMA 2020.
[13] Such as the Securities and
Exchange Commission (SEC) (SEC Rules, 2013) for capital market participation,
and Section 271of CAMA 2020.
[14] Nigerian Code of Corporate
Governance (NCCG), 2018
[15] Companies and Allied
Matters Act 2020, s21 ((1)- (3))
[16] ibid s18 ((1)-(3))
[17] ibid s27
[18] ibid s 80
[19] Infrastructure Concession
Regulatory Commission (Establishment, etc.) Act 2005, s14
[20] ibid s 1
[21] ibid s1(2)
[22] ibid s2 (1) and (2)
[23] ibid s2 (3)
[24] ibid s 2 (4)
[25] ibid s 4(1)
[26] ibid s 4 (2)
[27] ibid s 6
[28] ibid s 7 (4)
[29] ibid s 7 (3)
[30] ibid s 9
[31] ibid s10
[32] ibid s 8
[33] ibid s 7 (2) (a)
[34] ibid s12
[35] ibid s 13
[36] Infrastructure Concession Regulatory Commission
Act, 2005, Section 1
[37] Infrastructure Concession Regulatory Commission
Act, 2005, Section 3
[38] Infrastructure Concession Regulatory Commission
Act, 2005, Section 7
[39] Infrastructure Concession
Regulatory Commission ,PPP Manual for Nigeria < https://www.icrc.gov.ng> accessed 28 March 2025
[40] Public Procurement Act, 2007, Sections 5 and 6
[41] (FIRS) (CITA, 2007; and VAT Act, 2007
[42] Nigerian Sovereign
Investment Authority, Lagos-Ibadan
<https://nsia.com.ng> 21/03/2025
[43] Lekki Concession Company Limited <ww.lcc.com.ng>
21/3/2025
[44] African Development Bank
Group, Rail Infrastructure in Africa:
Financing Options < https://www.afdb.org> accessed 21 /03/2025
[45]
Wasiu Olaniyi,The proposed Eko Atlantic City project, Victoria Island, Lagos:
Preliminary impact assessment of land reclamation on the aquatic lives and
climate change <https://www.researchgate.net>121/3/2025
[46]
Osinachi Nwandem, Securitisation and SPV: A Critical Assessment of the Asset
Management Corporation of Nigeria (AMCON) < https://papers.ssrn.com> 21/03/2025
[47] BusinessDay. (2023). FG
creates SPVs to boost participation of states in mining activities. BusinessDay
NG.
<https://businessday.ng/business-economy/article/fg-creates-spvs-boost-participation-states-mining-activities/>
21/03/2025
[48] SEC Nigeria, sukuk (Islamic
bond) At A Glance <https://sec.gov.ng>
21/3/2025
[49] World Bank. (2018).
*Public-Private Partnerships Reference Guide* (2nd ed.). Retrieved from [World
Bank website](https://ppp.worldbank.org/public-private-partnership/).
[50] BoI. (2020). *Annual Report
2019*. Retrieved from [BoI website](https://www.boi.ng/).
[51] Adegbite, E. (2021).
Regulatory Challenges in the Establishment and Management of SPVs in Nigeria.
Journal of African Finance, 13(2), 45–60. See also Okoye, V. (2022).
Inconsistent Enforcement of SPV Regulations: A Nigerian Perspective. African Journal
of Economic Law, 11(1), 55–70.
[52] Uche, C. (2023). Enhancing
Regulatory Capacity for SPVs in Nigeria. Journal of African Economic Law,
12(1), 40–55. Adeleke, O. (2020). Compliance and Capacity Challenges in
Nigeria's SPV Market. Nigerian Journal of Business Law, 10(3), 22–35.
[53] Oladipo, T. (2021).
Taxation and Dispute Resolution Challenges for SPVs in Nigeria. Journal of
Nigerian Securities Regulation, 14(2), 10–25. See also Adegbite, E. (2021).
Regulatory Challenges in the Establishment and Management of SPVs in Nigeria.
Journal of African Finance, 13(2), 45–60.
[54] Okoye, V. (2022).
Inconsistent Enforcement of SPV Regulations: A Nigerian Perspective. African
Journal of Economic Law, 11(1), 55–70. See also Uche, C. (2023). Enhancing
Regulatory Capacity for SPVs in Nigeria. Journal of African Economic Law,
12(1), 40–55.
[55] Adeleke, O. (2020).
Compliance and Capacity Challenges in Nigeria's SPV Market. Nigerian Journal of
Business Law, 10(3), 22–35. See also Oladipo, T. (2021). Taxation and Dispute
Resolution Challenges for SPVs in Nigeria. Journal of Nigerian Securities
Regulation, 14(2), 10–25.
[56] Adegbite, E. (2021).
Regulatory Challenges in the Establishment and Management of SPVs in Nigeria.
Journal of African Finance, 13(2), 45–60. See also Uche, C. (2023). Enhancing
Regulatory Capacity for SPVs in Nigeria. Journal of African Economic Law,
12(1), 40–55.
[57] Okoye, V. (2022).
Inconsistent Enforcement of SPV Regulations: A Nigerian Perspective. African
Journal of Economic Law, 11(1), 55–70. See also Adeleke, O. (2020). Compliance
and Capacity Challenges in Nigeria's SPV Market. Nigerian Journal of Business
Law, 10(3), 22–35.
[58] Oladipo, T. (2021).
Taxation and Dispute Resolution Challenges for SPVs in Nigeria. Journal of
Nigerian Securities Regulation, 14(2), 10–25. See also Uche, C. (2023).
Enhancing Regulatory Capacity for SPVs in Nigeria. Journal of African Economic
Law, 12(1), 40–55.
No comments:
Post a Comment