Reforming Nigeria’s Insolvency Framework For The Realities Of Modern Business -By Ishie-Johnson Emmanuel

ABSTRACT

Nigeria’s insolvency regime, historically fragmented across the Companies and Allied Matters Act, the Bankruptcy Act, and various sectoral regulations, has undergone significant reform with the enactment of the Companies and Allied Matters Act 2020 (CAMA 2020). However, the regime remains largely untested, liquidation-centric in practice, and insufficiently adapted to Nigeria’s evolving business environment, characterized by a dominant informal MSME sector, a rapidly expanding fintech and digital-assets economy, and increasing cross-border investment structures. This article critically evaluates the adequacy of CAMA 2020’s innovations, particularly Company Voluntary Arrangements, Administration, and the Insolvency Practitioners regime, in addressing the demands of contemporary commerce. Drawing on comparative lessons from the UK, Singapore, and the UNCITRAL Legislative Guide, it argues that Nigeria requires a second-generation reform agenda built on five pillars: (i) an effective corporate rescue culture supported by functional moratoriums; (ii) a simplified and low-cost insolvency framework for MSMEs; (iii) statutory recognition and treatment of digital and intangible assets; (iv) the adoption of a comprehensive cross-border insolvency framework; and (v) institutional strengthening through specialized courts and an independent regulatory body. Without such reforms, Nigeria’s insolvency framework may continue to impede the rescue of viable businesses and discourage entrepreneurial risk-taking.

Keywords: Nigeria, CAMA 2020, corporate rescue, MSME insolvency, administration, cross-border insolvency, fintech

1. Introduction

Insolvency law in Nigeria has long been described as ‘a law in the books, not in action’.¹ For decades, the operative statutes—the Companies and Allied Matters Act 1990, the Bankruptcy Act 1979, and the Companies Winding-Up Rules—provided primarily for liquidation, with receivership serving as the de facto debt-enforcement tool for banks.² Corporate rescue was largely alien to the system; business failure was stigmatized.

The enactment of the Companies and Allied Matters Act 2020 (CAMA 2020) represented the most ambitious overhaul of Nigeria’s insolvency framework in three decades. ³ For the first time, Nigerian law introduced a comprehensive corporate rescue toolkit, including Company Voluntary Arrangements (CVAs), Administration, and a moratorium regime, alongside provisions for the licensing of Insolvency Practitioners. ⁴

Yet, six years on, the promise remains largely unrealized. Administrations are rare, CVAs rarer still, and liquidation remains cumbersome and slow.⁵ More fundamentally, CAMA 2020 was enacted before the full expansion of Nigeria’s modern business environment: over 39 million MSMEs contributing approximately 48% to GDP,⁶ a globally recognized fintech ecosystem processing billions of digital transactions, widespread cryptocurrency adoption despite regulatory ambivalence,⁷ and increasingly complex holding structures for oil, gas, and technology investments.

This article argues that Nigeria now requires a second-generation insolvency reform—not a repeal of CAMA 2020, but a recalibration of the existing framework to ensure that it remains fit for purpose in a rapidly evolving commercial environment.

2. EVOLUTION AND LIMITS OF NIGERIA’S CURRENT REGIME

Pre-2020, Nigeria operated a creditor-friendly, enforcement-driven system. Banks routinely appointed receivers under debentures, often precipitating the collapse of otherwise viable companies. ⁸ The Bankruptcy Act 1979, which applies to individuals, was archaic, criminalized debtors, and provided for a lengthy discharge period that was inimical to entrepreneurship. ⁹

CAMA 2020 sought to address these deficiencies by introducing UK-style corporate rescue procedures. Chapter 18 introduces Administration (ss 443–559), allowing an administrator to take control of a company subject to a statutory moratorium. Chapter 17 provides for Company Voluntary Arrangements (ss 434–442). Section 496 imposes a duty on administrators to rescue a company as a going concern where possible. The Act also empowers the Corporate Affairs Commission (CAC) to regulate insolvency practitioners. ¹⁰

These are laudable reforms, but three significant limitations persist. First, implementation deficit: Nigeria lacks specialist insolvency judges, while the Federal High Court, which has exclusive jurisdiction, is already overburdened. ¹¹ There is also no Practice Direction specifically addressing administration timelines, creating the potential for delays that may undermine the objective of corporate rescue. Second, cost and complexity: the administration procedure mirrors the UK’s relatively expensive model and may be inaccessible to the typical Nigerian SME with debts below ₦50 million. Third, conceptual gaps: CAMA 2020 is silent on digital assets, pre-pack arrangements, cross-border cooperation, and the treatment of informal business structures.

3. REALITIES OF MODERN NIGERIAN BUSINESS CHALLENGING THE FRAMEWORK

3.1 The MSME Dominance and Informality

Nigeria’s economy is heavily driven by MSMEs, yet its insolvency framework remains largely focused on formal, incorporated businesses. Many MSMEs operate as business names or unincorporated entities, placing them outside CAMA 2020’s corporate rescue provisions and within the scope of the outdated Bankruptcy Act. Even incorporated small companies may struggle to afford administration, with professional costs often exceeding ₦5 million. The result is disorderly business closure, job losses, and non-payment of suppliers—a lose-lose outcome. ¹²

3.2 The Digital and Fintech Economy

Nigeria is Africa’s leading fintech hub and among the world’s highest adopters of cryptocurrency. ¹³ Startups increasingly hold value in software intellectual property, user data, and digital-token holdings rather than traditional physical assets. CAMA 2020 does not expressly address the treatment of digital assets in insolvency. This raises difficult questions: Can a trustee take control of Bitcoin held on a foreign exchange? Can a moratorium prevent the automatic liquidation of crypto-collateral through a smart contract? The Central Bank of Nigeria’s evolving regulatory position on cryptocurrency has further compounded the uncertainty. ¹⁴ Without greater legal clarity, insolvency practitioners may face significant difficulties in identifying, securing, and maximizing the value of digital assets.

3.3 Director Behavior and Access to Finance

Nigerian directors may face a difficult choice between continuing to trade while insolvent and risking personal liability for fraudulent trading under s 672 of CAMA 2020, or closing the business prematurely. Unlike the UK’s ‘safe harbor’ or Australia’s restructuring safe harbor, ¹⁵ Nigeria offers no comparable protection for directors who diligently pursue corporate rescue. This may discourage early intervention and make financial institutions more cautious about supporting restructuring efforts, thereby perpetuating a culture of aggressive enforcement.

3.4 Cross-Border Investment Structures

Modern Nigerian businesses, particularly in the oil and gas, technology, and manufacturing sectors, increasingly operate through holding companies incorporated in jurisdictions such as Mauritius, the Netherlands, or the UK. When financial distress occurs, as illustrated by the Etisalat/9mobile and Arik Air sagas, ¹⁶ Nigeria lacks a comprehensive legal framework for cooperation with foreign courts, recognition of foreign insolvency proceedings, or coordination of group insolvencies. Nigeria has not adopted the UNCITRAL Model Law on Cross-Border Insolvency. This creates uncertainty in the administration of assets and proceedings spanning multiple jurisdictions and may encourage asset stripping and forum shopping.

3.5 Institutional Weakness

Effective insolvency administration requires competent practitioners and specialized judicial expertise. Nigeria’s insolvency practitioners are subject to a relatively new regulatory framework, with concerns regarding training, professional ethics, and fee transparency. ¹⁷ There is no independent Insolvency Service, while the CAC, already responsible for extensive corporate registration and regulatory functions, may not be ideally positioned to serve as a specialized insolvency regulator. Asset tracing also remains largely manual, and there is no central electronic claims register.

4. TOWARDS A FIT-FOR-PURPOSE NIGERIAN FRAMEWORK: REFORM PILLARS

4.1 Pillar 1: Entrenching a True Rescue Culture

CAMA’s moratorium regime must be made effective in practice. The National Assembly should amend ss 717–720 to provide for a 60-day standalone pre-administration moratorium obtainable upon filing, without a court order, and supervised by a licensed practitioner, akin to the approach introduced under the UK Corporate Insolvency and Governance Act 2020.¹⁸ A Practice Direction issued by the Chief Judge of the Federal High Court should impose strict six-month timelines for administrations and permit virtual creditors’ meetings, which have become increasingly common since the COVID-19 pandemic.¹⁹

Crucially, Nigeria should introduce a statutory safe harbor. Directors who engage a licensed practitioner at the first indication of likely insolvency and pursue a restructuring plan in good faith should be protected from liability arising solely from continuing to trade during the restructuring process.

4.2 Pillar 2: A Simplified MSME Insolvency Track

Nigeria should establish a distinct MSME Insolvency Procedure through subsidiary legislation under CAMA. Drawing on Singapore’s Simplified Insolvency Programme²⁰ and the UNCITRAL MSME Guide, ²¹ this framework could provide for: (a) debtor-in-possession restructuring for debts below ₦100 million; (b) e-filing through the CAC portal; (c) 90-day plan approval subject to a 60% majority; and (d) capped practitioner fees.

For micro-businesses and business names, the moribund Bankruptcy Act 1979 should be repealed and replaced with a modern Personal Insolvency Act providing for Individual Voluntary Arrangements and a 12-month automatic discharge for honest debtors.

4.3 Pillar 3: Legislating for Intangible and Digital Assets

The definition of ‘property’ in s 868 of CAMA 2020 should be amended to expressly include ‘digital assets, virtual assets, data, and intellectual property rights’. Following AA v Persons Unknown, ²² Nigerian courts should be empowered to treat cryptocurrency as property capable of vesting in an administrator. The framework should also empower administrators to obtain court orders for the turnover of private keys and to stay the enforcement of smart contracts during a moratorium. The Securities and Exchange Commission’s Rules on Digital Assets 2022 provide a regulatory foundation with which insolvency law should be aligned. ²³

Employee priority under s 657 should also be modernized to cover dependent contractors in the gig economy, reflecting Nigeria’s expanding platform workforce.

4.4 Pillar 4: Adopting Cross-Border Insolvency Rules

Nigeria should domesticate the UNCITRAL Model Law on Cross-Border Insolvency as a new Part of CAMA, drawing on approaches adopted or considered by jurisdictions such as South Africa and Kenya.²⁴ This would allow Nigerian courts to recognise foreign main proceedings, grant appropriate relief, and cooperate directly with foreign courts—measures that are vital for multinational restructurings. For enterprise groups, provisions on procedural coordination, as recommended by UNCITRAL Part Three, should be adopted to address the complexities of group insolvencies involving conglomerates such as the Dangote or BUA groups.

4.5 Pillar 5: Building Institutions and Changing Culture

First, Nigeria should establish a dedicated Insolvency Unit within the Federal High Court in Lagos and Abuja, with judges trained in corporate rescue and insolvency law. Second, responsibility for insolvency-practitioner regulation should be separated from the CAC and transferred to an independent Nigerian Insolvency Service, responsible for licensing, discipline, and maintaining a public register of disqualified directors to curb ‘phoenix’ abuse. Third, practitioners should be required to provide fee estimates, while an online asset-auction platform should be established under the supervision of the administrator to improve transparency and maximize returns. ²⁵

Finally, Nigeria must address the prevailing culture surrounding business failure. Insolvency should be reframed in policy discourse not merely as a failure to be punished, but as a mechanism for managing economic risk and facilitating the rescue of viable businesses. University curricula, NBA training, and CBN guidance to financial institutions should therefore promote restructuring alongside, rather than in place of, traditional enforcement mechanisms.

5. Conclusion

CAMA 2020 gave Nigeria the skeleton of a modern insolvency system; it now needs the institutional capacity, practical mechanisms, and regulatory support required to function effectively in a modern business climate. A Nigerian business in 2026 is more likely to be a Lagos-based fintech company holding customer data and stablecoins, employing 30 contractors, and owned through a Dutch BV than a Kano textile mill with looms and warehouses. Applying a 1990s liquidation mindset to such an entity risks destroying value for creditors, employees, investors, and other stakeholders.

The five-pillar agenda proposed in this article—effective corporate rescue, accessible MSME insolvency procedures, clarity on digital assets, cross-border cooperation, and institutional strengthening—is not imported theory. It is a pragmatic response to the realities of Nigeria’s evolving business environment. If implemented, these reforms could help Nigeria move from a system that primarily facilitates the winding-up of distressed businesses to one that also provides meaningful opportunities for their rescue and restructuring. In doing so, the framework could help protect jobs, deepen credit markets, and foster the entrepreneurial risk-taking necessary for economic diversification.

ENDNOTE

¹ See AO Adeyemi, ‘Nigerian Insolvency Law: A Reform Agenda’ (2018) 12 Nigerian Bar Journal 45.

² See IR Adegbite, ‘Receivership as Debt Recovery Tool in Nigeria’ (2015) 9 Journal of African Law 112.

³ Companies and Allied Matters Act 2020 (Nigeria).

⁴ ibid ss 712-731.

⁵ See World Bank, _Doing Business 2020: Nigeria – Resolving Insolvency_ (World Bank 2020) ranking Nigeria 148/190.

⁶ SMEDAN/NBS, _National Survey of Micro Small & Medium Enterprises 2021_ (2022).

⁷ See Chainalysis, _Global Crypto Adoption Index 2023_ ranking Nigeria 2nd globally.

⁸ Adegbite (n 2).

⁹ Bankruptcy Act 1979 (Nigeria), s 1.

¹⁰ CAMA 2020 (n 3) ss 705-711.

¹¹ Federal High Court Act, s 7; see also CAMA 2020 s 732.

¹² See World Bank, _Principles for Effective Insolvency and Creditor/Debtor Regimes_ (revised 2021) Principle A5.

¹³ Disrupt Africa, _Nigerian Startup Funding Report 2023_.

¹⁴ Central Bank of Nigeria Circular BSD/DIR/PUB/LAB/014/001 (5 February 2021); subsequently lifted December 2023.

¹⁵ Corporations Act 2001 (Australia), s 588GA; Corporate Insolvency and Governance Act 2020 (UK), s 12.

¹⁶ See _United Capital Trustees v Etisalat_ (unreported); AMCON v Arik Air (2017).

¹⁷ See Business Recovery and Insolvency Practitioners Association of Nigeria (BRIPAN) Reports 2022.

¹⁸ Corporate Insolvency and Governance Act 2020 (UK), Part A1.

¹⁹ cf UK Insolvency (Amendment) Rules 2021 on virtual meetings.

²⁰ Insolvency, Restructuring and Dissolution Act 2018 (Singapore), Part 10.

²¹ UNCITRAL, _Legislative Guide on Insolvency Law for Micro and Small Enterprises_ (2021).

²² _AA v Persons Unknown_ EWHC 3556 (Comm).

²³ SEC Nigeria, _New Rules on Issuance, Offering Platforms and Custody of Digital Assets_ (2022).

²⁴ See UNCITRAL Model Law on Cross-Border Insolvency (1997).

²⁵ See World Bank (n 12) Principle C8 on transparency.[2019]

Ishie-Johnson Emmanuel Esq. Writes from Ishie-Johnson and Associates
Email: emmajohnsonace@gmail.com
Phone No: 08033816237, 08023186281