THE PUBLIC PRIVATE PARTNERSHIP FINANCIAL MODEL GUIDE 2025; KEY TAKEAWAYS

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ADERONKE ALEX-ADEDIPE AND ENIOLA SOGBESAN

INTRODUCTION

Against the backdrop of limited public resources and Nigeria’s rising infrastructure demand, Public-Private Partnerships (PPPs) have become integral to bridging the investment gap. In Nigeria, the Infrastructure Concession Regulatory Commission (ICRC or the “Commission”) is responsible for establishing clear PPP frameworks for Federal Government projects.

The release of the PPP Project Financial Model Guide (the “Project Guide”) by the ICRC in August 2025 marks a significant milestone in Nigeria’s PPP regulatory landscape. The Project Guide outlines the minimum benchmark for the preparation, testing, and presentation of PPP financial models in Nigeria.

This newsletter reviews the Project Guide, highlighting its scope and structure, revenue and cost assumptions, financing structure, and other related matters.

Project Scope and Structure

The Project Guide requires that every PPP financial model must begin with a clear project overview setting out the purpose, scope, and objectives of the project. This requirement provides clarity, strengthens the model’s credibility and gives regulators and investors a reliable basis for evaluating the viability of a project.

In addition, all principal stakeholders (government authorities, private financiers, contractors, and operators) in a project must be clearly identified and have their roles defined. The financial model should also specify the contractual structure of the project (e.g. Design-Build- Finance-Operate and Transfer, Build- Operate and Transfer etc) and define how risks, revenue, and responsibilities are distributed.

Finally, the Project Guide requires a complete project timeline, encompassing both the construction and operational aspects of the project. This is to ensure that the long-term financial obligations and service delivery goals can realistically be achieved.

Revenue Assumptions and Projections

The Project Guide underscores the critical importance of accurately identifying and projecting revenue assumptions, which is a core financial driver of any PPP project. The revenue assumptions should consider the following matters:

  1. Revenue Sources – All Financial models must clearly set out all revenue sources and classifying them under user-pay, government-pay, or hybrid models.
  2. Revenue Streams and Timing – Project sponsors must identify potential ancillary revenue streams, such as income from commercial facilities, advertising, or third-party activities to reflect the full revenue picture.
  3. Growth Assumptions – The Project Guide mandates disclosure of the expected timing and frequency of revenue inflows. These revenue inflows should incorporate assumptions on inflation, GDP, and other macroeconomic indicators.
  4. Sensitivity/Scenario Analyses – To improve project reliability, the Project Guide requires financial models to be tested under baseline, optimistic, and pessimistic scenarios. This helps show how robust the project is and supports better risk allocation.

Cost Assumptions and Projections

In a PPP project, carefully estimating costs is equally as important as projecting revenues. A good financial model should clearly show the capital and operational costs of building and maintaining the project. In this regard, the Project Guide lists the following matters which must be considered in any cost assumption and projection.

  1. Capital Expenditure (CapEx) and Operating Expenditure (OpEx) – The Project Guide requires all PPP financial models to provide a comprehensive assessment of both CapEx and OpEx. These must include obligations such as design, construction, land acquisition, maintenance and personnel costs.
  2. Fixed, Variable and Contingency Costs – All PPP financial models must distinguish fixed from variable costs and also include contingency cots to manage unexpected shocks or project overruns. This should be integrated into the financial models to mitigate against financial fluctuations and safeguard stability. These buffer mechanisms are designed to strengthen the financial resilience of PPP projects and provide certainty for public and private stakeholders.

Taxation and Accounting Assumptions

To ensure financial transparency, the Project Guide requires PPP financial models to detail how tax and accounting rules will apply to a project. This includes aligning asset depreciation with asset lifespan and factoring available tax incentives. The Project Guide requires all tax and accounting assumptions to reflect existing laws and be updated as regulations evolve.

Financing Structure

This section of the Project Guide makes detailed provisions on how the PPP project will be funded and the implications for risk allocation. The financial models of all PPP projects should integrate the following features;

  1. Equity/Debt – The capital structure of the PPP project must be determined by calculating the proportion of equity (provided by private investors) to debt (raised through loans, bonds, or other instruments). All PPP projects should be funded with an appropriate mix of equity and debt. The financial model should also include a detailed debt amortization schedule, showing principal and interest repayments within the contract term.
  2. Project Financing/ Corporate Financing – The PPP project must clarify whether the financing will be arranged with reference to the project’s Special Purpose Vehicle (SPV) (project financing) or the project sponsors’ balance sheet (corporate financing).
  3. Government Contributions –The Project Guide recognizes the importance of government support through provision of grants, guarantees, and viability gap funding to make projects more bankable and financially sustainable. In the Nigerian context, the recognition of government support mechanisms is significant, as it improves the attractiveness of PPP projects to investors.

Financial Metrics and Key Performance Indicators (KPIs)

In measuring the financial metrics and key performance indicators of a PPP project, the Project Guide requires every PPP financial model to determine whether the project can fulfill its debt obligation using the Debt Service Coverage Ratio (DSCR).

It also mandates the computation of the Weighted Average Cost of Capital (WACC) – which measures the cost of equity and debt in the project. The project must also determine its Return on Equity (ROE) and Payback Period to estimate reasonable project expectations and ascertain the duration within which the invested capital is recovered.

Cumulatively, these financial metrics and key performance indicators set out predetermined triggers for evaluating the profitability of a PPP project. They also help to set expectations, guide investment decisions, and provide a basis to measure the viability of a PPP project.

Government Revenue and ICRC Fees

The Project Guide provides that in user pay of hybrid PPP arrangements, the Federal Government will receive an agreed share of the revenue generated from the project.  However, in Government-pay PPPs, the Government will not be entitled to any revenue share. In addition, the ICRC charges regulatory fees on PPP projects. This fee includes a one-off charge of up to 5% of entry fees and a mandatory annual fee of 1% of the project’s gross revenues.

Reporting and Documentation

The Project Guide reiterates the need for clarity and transparency in all PPP financial models. It requires the sensitivity and scenario analyses to be shown in a way that is easy to understand and gives stakeholders a clear view of all risks and possible safeguards.

Also, every PPP financial model must include an executive summary that summarises its viability, returns, risks, and basis of assumptions. Also, all financial models must undergo an independent audit to confirm that it is accurate, logically sound, and complete before submission to the Commission.

Conclusion

With the launch of the Project Guide, the ICRC has taken an important step towards strengthening Nigeria’s PPP framework. By setting clear rules for how financial models should be prepared, tested, and reviewed, the Project Guide reduces uncertainty and builds trust among investors and lenders.

It also establishes a clear, reliable, and investment-ready framework for project development, underscoring the critical importance of PPP financial models in balancing public interest with private capital, and securing the sustainability of PPP projects. With consistent application and periodic updates, the Project Guide has the potential to deliver enhanced value to both public authorities and private stakeholders.

Nigerian Tax Reform Acts: Structuring for Efficiency in an Evolving Fiscal Landscape

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BY SEUN TIMI-KOLEOLU AND PROMISE ITAH
Introduction

On June 26, 2025, the Federal Government of Nigeria signed into law a suite of tax reform legislation that consolidates and replaces over a dozen laws. The reforms are anchored on four principal Acts: Nigeria Tax Act (Tax Act); Nigeria Tax Administration Act (Tax Administration Act); Nigeria Revenue Service Act (NRSA); and Joint Revenue Board Act (JRBA). While the NRSA and JRBA are already operational, the Tax Act and the Tax Administration Act will take effect on January 1, 2026. For a detailed overview of these reforms, please see our newsletter here.

In the light of these reforms, businesses must take a new look at their current structures and, where necessary, strategically restructure to prevent inefficiencies, ensure compliance, and capture available opportunities.

In this newsletter, we highlight key reforms and strategies that businesses can adopt to operate more efficiently.

How Businesses Should Restructure in Response to Key Reforms

1. Business Classification and Tax Exposure

The Tax Act classifies businesses by turnover and asset size.

a.     Small business: This refers to businesses (excluding businesses providing professional services) with annual turnovers not exceeding ₦100 million and fixed assets below ₦250 million – a significant increase from the previous turnover threshold of ₦25 million. Some of the benefits applicable to small businesses include:

  • exemption from Corporate Income Tax (CIT), Capital Gains Tax (CGT), and the Development Levy;
  • access to a start-up tax credit and temporary tax holidays for businesses in priority sectors such as agriculture, manufacturing, and technology, provided they formalize their operations with the Corporate Affairs Commission (CAC).

b.     Larger business: This refers to businesses with annual turnover exceeding ₦100 million and fixed assets above ₦250 million. Some key points to note are that:

  • larger companies are subject to payment of Corporate Income Tax (CIT), Capital Gains Tax (CGT), and the Development Levy;
  • larger companies may benefit from reduced CIT rate from 30% to 25%, but this applies only to qualifying entities in approved sectors and remains subject to presidential discretion.

Key Business Consideration: In view of the foregoing, businesses may wish to assess whether restructuring into smaller entities or special purpose vehicles could unlock these benefits. The Tax Administration Act, however, introduces strict anti-avoidance rules, and as such any restructuring must be carefully designed to withstand regulatory scrutiny.

2. Capital Gains Tax and Holding Structures

The Tax Act increases the CGT rate from 10% to 30%. The scope of CGT has also been expanded to cover indirect offshore transfers of Nigerian assets, including shares in Nigerian companies.

Key Business Consideration: In view of the foregoing, multinational and investment holding groups should carefully review their offshore structures. In some cases, shifting asset ownership to Nigeria or restructuring holdings may be necessary to reduce exposure under the new tax rules.

3. Digital Tax Infrastructure

The NRSA introduces mandatory e-invoicing and real-time VAT reporting, marking a shift to a fully digital tax administration system. These measures, designed to improve transparency and curb tax evasion, will significantly alter how companies manage their reporting obligations.

Key Business Consideration: Businesses should:

  • invest in compliant accounting software;
  • train their finance teams;
  • update invoicing and contracting frameworks; and
  • engage legal and tax advisors to review operational processes and confirm that systems are fully aligned with the new digital requirements.

4. Incentives for Economic Development

The Tax Act introduces a 5% annual tax credit for qualifying expenditure on long-term assets in key sectors such as agriculture, renewable energy, and manufacturing. This replaces the former Pioneer Status regime.

Key Business Consideration: Businesses planning to invest in these sectors may consider channeling their funding through eligible entities or joint ventures to maximize access to tax credits. It is important to conduct prior due diligence on the entities and maintain proper supporting documentation. This is essential not only to claim the credits but also to safeguard them during regulatory reviews.

5. Compliance and Banking Integration

The Tax Administration Act makes a Tax Identification Number (TIN) mandatory for all taxable persons. Banks are now required to verify TINs before opening or maintaining accounts, and failure to comply could restrict access to banking services.

Key Business Consideration: Businesses must immediately verify that all group entities, directors, and beneficial owners are properly registered with the Nigeria Revenue Service. A compliance audit at this stage will prevent operational disruptions and reputational risks once enforcement begins.

Conclusion

The 2025 tax reforms represent a shift in Nigeria’s fiscal landscape, reshaping compliance requirements and creating new opportunities for growth. Businesses that take early steps to review their structures and align with the new framework will be better positioned to stay compliant, efficient, and competitive. The content of this newsletter is, however, not exhaustive and should not be taken as legal or financial advice. Businesses are encouraged to seek tailored professional guidance to understand the specific impact on their operations.

For further information on any of the issues covered in this newsletter, please contact us at info@pavestoneslegal.com. At Pavestones, we deliver quality and innovative legal support across diverse industries, helping businesses operate in compliance with applicable laws and regulations to drive sustainable business growth.

FUTURE OF FINTECH AND DIGITAL PAYMENTS IN NIGERIA: CBN MANADATES THE ADOPTION OF ISO 20022 MESSAGING STANDARDS AND GEO-TAGGING OF POINT-OF- SALE TERMINALS

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BY ADERONKE ALEX-ADEDIPE AND OMODELE FATODU

INTRODUCTION

In a circular dated August 25,2025, the Central Bank of Nigeria (CBN) issued a directive mandating the geo-tagging of all Point-of-Sale (PoS) Terminals in Nigeria and that electronic payment messaging adopt the ISO 20022 standard by October 31, 2025. This means that every PoS device in Nigeria must be fitted with GPS capability so its exact, physical location can be identified, and that all electronic payment messages must follow a globally recognized standard for financial messaging (ISO 20022) that uses a single, structured data language to enable richer, interoperable and more accurate payment information.

This directive by the CBN aims to enhance transaction security, reduce fraud, and improve traceability. By linking each PoS terminal to precise geographic coordinates, the CBN ensures that every electronic transaction can be tied to a verifiable physical location.

This directive applies to financial service providers including commercial and microfinance banks that deploy or manage PoS networks, mobile money operators, payment service providers, merchants, agents, and retailers who accept card payments through PoS terminals.

Key Requirements

  1. PoS Registration – all devices must be registered with a Payment Terminal Service Aggregator with accurate latitude and longitude coordinates indicating the Merchant’s place of business and service status.
  2. Operational Radius – each PoS Terminal may operate only within a 10-metre radius of its registered location. Any activity outside this range will be flagged.
  3. Adoption of the ISO 20022 Standard – all domestic and international payment messages must conform to the ISO 20022 standard, a global financial messaging standard which provides for faster processing of payments, enables robust fraud-detection, and improves the traceability of transactions by the October 31, 2025 deadline.
  4. Geo-Tagging of PoS Terminals – All existing and newly deployed PoS Terminals must have native geolocation services enabled.
  5. Certification with the National Central Switch (NCS) – The NCS is the switching infrastructure operated by the Nigerian Inter-Bank Settlement System (NIBSS). It enables electronic payment interoperability and connectivity between various financial institutions, payment service providers, and payment terminals. All operators are to ensure that every PoS Terminal and its software is tested and approved on the NIBSS Central Switch to ensure that they meet the technical, security, and interoperability standards before they can go live. PoS Terminals are now mandated to include the NCS Software Development Kit for Geolocation monitoring and Geofencing implemented within its application libraries.
  6. Implementation timeline – All existing PoS Terminals must be geo-tagged within 60 days of the circular, while new PoS Terminals must be geo-tagged before certification and activation. Operators much update each PoS Terminal’s software to enable the automatic capture and transmission of location data and replace any devices which are not compatible with geo-tagging software.
  7. Mandatory Geo-reporting – The PoS Terminal itself must automatically capture and transmit the GPS location at the point a transaction is initiated, embedding it in the message payload for compliance monitoring

As the CBN will begin compliance checks on October 20, 2025, banks, fintech operators, and merchants are required to immediately audit their PoS Terminals and networks, upgrade or replace non-compliant devices. Merchants and agents should ensure that PoS Terminals stay within the permitted range at their registered address to avoid potential disruption of PoS Terminal operation by the CBN.

MERGERS & ACQUISITIONS IN NIGERIA IN VIEW OF RECAPITALIZATION IN THE BANKING AND INSURANCE SECTORS- KEY CONSIDERATIONS

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BY SEUN TIMI-KOLEOLU AND MARK IMONITIE
Introduction

Mergers and Acquisitions (M&A) play a crucial and strategic role in enabling companies to drive growth, foster innovation, and sustain a competitive edge. In Nigeria, a growing number of businesses are restructuring and consolidating their assets and resources through mergers and acquisitions, with the aim of expanding their market share and complying with recapitalization requirements set by industry regulators.

In this newsletter, we highlight the potential for M&A in Nigeria necessitated by the ongoing recapitalization in the country’s banking, insurance and finance sectors while advocating for observance of data governance practices in M&A deals.

A.   REGULATORY REFORMS DRIVING M&A IN NIGERIA

Sector regulatory reforms often drive M&A as companies respond to changes in policies. Such reforms can create new compliance requirements and open opportunities that prompt businesses to merge for strategic alignment and regulatory compliance.

The CBN in its March 28, 2024 circular announced an upward review of the minimum capital requirements of banks in Nigeria, mandating banks to raise their minimum paid-up capital by March 2026 as follows: ₦500 billion for international banks; ₦200 billion for national banks; ₦50 billion for regional banks; ₦20 billion for national non-interest banks; and ₦10 billion for regional non-interest banks.

To meet these capital thresholds, banks are leveraging mergers and acquisitions. An example is the concluded merger between Union Bank of Nigeria and Titan Trust Bank. The ongoing merger between Providus Bank and Unity Bank which commenced in 2024 is a prospective M&A deal in response to the CBN recapitalization requirements.

With the deadline of March 31, 2026 fast approaching, banks have either met or seek to meet the new minimum capital requirements through M&A strategies and more deals are anticipated.

Similarly, the insurance industry is in a transition phase resulting from the Nigerian Insurance Industry Reform Act 2025 (NIIRA) which mandates recapitalization of insurance entities operating in Nigeria. Life insurance companies must have at least ₦10 billion; Non-life insurance companies at least ₦15 billion; and Reinsurance companies are mandated to have at least ₦35 billion.  In view of this, there is good possibility that a few mergers would occur in the insurance industry.

B.    PROCESS FOR M&A TRANSACTIONS

The key requirements for M&A in Nigeria are primarily regulated by the Federal Competition and Consumer Protection Act 2018 (FCCPA) with additional regulations by other relevant laws depending on the sector. The process includes:

1.     Preliminary Planning

Preliminary planning represents the crucial first phase in any successful merger process. The party seeking to merge must clearly define the primary objectives driving the merger and identify the ideal target company. The acquiring party may initiate the deal by sending a Letter of Intent (LoI) to the target company. The LoI generally outlines the main terms and provides an initial overview of the proposed merger.

2.     Due Diligence

Conducting due diligence is a vital requirement in the M&A process, involving a detailed evaluation of the target company. Key elements examined during due diligence include: the target’s corporate structure and governance; outstanding debts; information technology systems; intellectual property; real estate; ongoing or potential litigation; human resources; insurance coverage; and regulatory compliance.

3.     Negotiation

In undertaking an M&A transaction, parties are required to negotiate and agree on the key terms of the merger. This includes deciding purchase price, payment method, assets to be acquired, and how the company will be managed after the merger. Parties would use reports from due diligence and company valuations to help make informed decisions during this stage.

4.     Corporate Approvals

Securing the necessary corporate approvals is a crucial step in an M&A transaction. The rights of minority shareholders must be carefully considered in this process. Under the Companies and Allied Matters Act, there are specific provisions that govern the acquisition of shares from minority or dissenting shareholders, and meeting these requirements is often a prerequisite for completing the transaction.

Shareholders also hold certain protections, such as pre-emption rights, which gives existing shareholders the opportunity to purchase existing or newly issued shares. These rights are typically checked and addressed before closing the transaction.

In addition to shareholder approvals, board approvals may also be required. Both parties must obtain all necessary corporate consents, as failure to do so could grant either party the right to terminate the deal.

5.     Regulatory Approvals

Depending on the industry, sector-specific regulatory approvals are required for M&As in Nigeria. For example, mergers involving banks need approval from the Central Bank of Nigeria (CBN), while insurance company mergers require authorization from the National Insurance Commission. These regulators oversee compliance with relevant laws during the merger.

Mergers with a combined annual turnover of ₦1 billion, or where the target’s turnover exceeds ₦500 million, must be notified to and approved by the Federal Competition and Consumer Protection Commission (FCCPC). Notification includes submitting Notification Form (Form 1), audited accounts, details of the parties, and the merger’s impact on competition.

For small mergers below the set threshold with potential to reduce competition, notification to the FCCPC is still required, though formal approval may not be mandatory. Failure to notify or secure approval before completing a merger (“gun-jumping”) can result in fines of up to 10% of the company’s annual turnover.

The Securities and Exchange Commission (SEC) regulates mergers involving public companies in Nigeria. Therefore, public companies must also notify the SEC before undertaking a merger. The Corporate Affairs Commission (CAC) regulates schemes of arrangement used by companies to implement mergers and supervises all related filings and resolutions.

6.     Execution and Closing

Parties to a merger are required to finalize and agree on all terms, conditions, and responsibilities related to the merger by negotiating and signing a definitive agreement, setting out the terms of the merger. Once all necessary legal and regulatory conditions are satisfied, ownership and control of the company is officially transferred according to the final agreement.

7.     Post-Merger Integration

This requirement marks the concluding phase of the merger process. It involves the unification of the merging entities into a single entity. It also involves the consolidation of personnel, systems, and operations leading to the establishment of the new entity’s corporate culture, practice and processes.

C.   DATA GOVERNANCE CONSIDERATIONS IN M&A

With increased emphasis on data protection in Nigeria under the oversight of the National Data Protection Commission (NDPC), the role of Data Governance in M&A transactions has become even more vital.

Alongside the M&A process set out above, it is essential for each company to appoint skilled representatives and professionals to ensure proper data handling and to mitigate regulatory risks throughout the transaction.

Effective Data Governance prevents a range of common pitfalls that often arise during M&A transactions. These pitfalls include:

i. Due Diligence Failures

Failure to take into consideration the level of data compliance of the merging entities during the due diligence phase, can result in incorrect valuations or expose a company to hidden liabilities.

ii. Regulatory and Compliance Risks

Data privacy regulations are critical in M&A transactions, as violations can result in fines and legal consequences. During a merger, entities must ensure that data exchanges or transfer comply with the Nigeria Data Protection Act 2023 (NDPA) and the guidelines set out by the NDPC, so that the rights of data subjects are protected against risks such as breach of sensitive personal data, data inaccuracies, unauthorized access, improper data sharing, and lack of consent. Effective Data Governance ensures compliance with these requirements, thereby mitigating regulatory risks and safeguarding the integrity and confidentiality of all data.

iii.  Data Integration Issues

During the integration phase, merging data from entities with differing structures can lead to data inaccuracies, potentially violating the rights of data subjects. Robust Data Governance ensures that data is clearly mapped and harmonized. Thereby sustaining data integrity and compliance throughout the post-merger process.

Conclusion

In view of the ongoing recapitalization in the banking and insurance sector, it is expected that there would be more mergers and acquisitions. Companies seeking to embark on M&As to achieve recapitalization must pay close attention to the processes and recommendations set out in this newsletter.

 

About us:

Pavestones is a full-service legal practice, registered with the Securities and Exchange Commission as a Capital Market Solicitor and is licensed by the Nigeria Data Protection Commission as a Data Protection Compliance Organization. Pavestones deliver quality and innovative legal support across diverse industries, helping clients operate in compliance with applicable laws and regulations to drive sustainable business growth.