A NEW REGULATORY ORDER FOR NIGERIAN PORTS – UNDERSTANDING THE NPERA ACT 2026

/0 Comments/in , /by

BY SEUN TIMI-KOLEOLU & ENIOLA SOGBESAN

Introduction 

Nigeria’s maritime sector is poised for a significant regulatory transformation following the enactment of the Nigerian Ports Economic Regulatory Agency Act, 2026 (the “NPERA Act” or the “Act”) by President Bola Ahmed Tinubu on June 19, 2026, and the repeal of the Nigerian Shippers’ Council Act (the “Nigerian Shippers’ Council Act”). The NPERA Act establishes a new framework for the economic regulation of Nigeria’s ports and transforms the former Nigerian Shippers’ Council into the Nigerian Ports Economic Regulatory Agency (the “Agency”), with an expanded mandate to oversee and regulate the economic aspects of port operations in Nigeria. 

More significantly, the Act marks a shift in the institutional role of the former Nigerian Shippers’ Council—from a statutory body primarily focused on shipper protection to an economic regulator with broader powers over port services. This expanded mandate positions the Agency to play a central role in shaping the commercial and competitive environment within Nigeria’s maritime sector. 

In this newsletter, we examine the key provisions of the NPERA Act and consider its implications for terminal operators, shipping lines, investors and the broader maritime industry.  

Objectives and Application of the Act 

The NPERA Act has two objectives which are: 

  1. to establish a legal framework for the efficient economic regulation of regulated services including vessel reception, carriage, storage and handling of cargo, freight forwarding, logistics services, and any other service declared to be a regulated service within Nigeria’s ports; and 
  2. to protect the interests of shippers, providers and users of regulated services. 

Compared to the former Nigerian Shippers Council Act, which was largely administrative and advisory, the NPERA Act is designed to actively regulate market participants and enforce service standards within Nigerian ports.  

The Nigerian Ports Economic Regulatory Agency 

The NPERA Act establishes and empowers the Agency to implement the provisions of the Act. In implementing the provisions of the Act, the Agency is required to perform its functions in a manner that does not contravene any law implemented by other government agencies. This requirement is intended to address potential concerns about regulatory overlap and conflict between the Agency and other agencies such as the Nigerian Ports Authority (NPA), the Nigerian Maritime Administration and Safety Agency (NIMASA) etc. 

Registration and Licensing 

The NPERA Act empowers the Agency to register and license regulated service providers. In exercising this function, the Agency is empowered to make regulations that specify the services that require registration and prescribe the conditions for registration, issuance of certificates, suspension, cancellation, revocation and de-registration.  

The registration requirements are also applicable to existing regulated service providers and other service providers licensed by any other relevant government agency within the ports. As of the date of this newsletter, we note that the Agency is yet to release any regulation for the registration of service providers. 

Determination of Tariffs, Rates and Charges 

The NPERA Act gives the Agency substantial powers to determine tariffs and fines. In addition, the Agency is empowered to set guidelines on tariffs, monitor compliance, set service delivery standards, and publish tariffs as may be necessary. 

The failure of any regulated service provider to comply with the guidelines that may be issued by the Agency will result in fines, institution of criminal proceedings or the revocation of the service providers license. More specifically, the Act imposes fines ranging from ₦2,000,000 to ₦20,000,000 on defaulting service providers. 

Conflict of Functions and Overlapping Mandates 

A significant issue arising from the NPERA Act is its interaction with existing sector regulators. The NPERA Act empowers the Agency to make regulations on standards and conditions of service delivery, market conduct, tariffs and other economic-regulatory matters in relation to “prescribed services”.  

The definition of “prescribed services” includes services provided by the National Inland Waterways Authority (NIWA), the Nigerian Ports Authority (NPA) and the Nigerian Railway Corporation. These provisions may potentially overlap with the regulatory powers exercised by those bodies under their own enabling laws. 

It is important to note that although the NPERA Act require the Agency to perform its functions without contravening the laws implemented by other regulators, it does not prescribe a mechanism for resolving any inconsistent directives between related regulators. This raises the question of which regulator’s directive should prevail where their regulatory mandates overlap. 

Conclusion 

As stated earlier, The Act is a significant shift from the shipper-protection framework under the repealed Nigerian Shippers’ Council Act towards a more robust economic regulation of Nigeria’s ports. Given Nigeria’s commitment under the Enhanced Trade and Investment Partnership (ETIP) with the United Kingdom announced on March 18, 2026, which we wrote about here, the NPERA Act appears to be a development that will potentially deliver benefits under the ETIP.  

Nevertheless, the practical impact of the Act will depend substantially on the regulations and guidelines to be issued by the Agency, as well as the effectiveness with which the Act will be implemented.  

For regulated service providers, the practical implications include –  

  1. registration may now be a precondition for operating or providing certain regulated services; 
  2. tariffs and charges are subject to the Agency’s regulatory framework; and  
  3. regulated entities will be subject to enhanced monitoring and enforcement measures.  

Accordingly, businesses operating in the ports sector should review their existing regulatory arrangements against the NPERA framework to ensure compliance. 

A NEW REGULATORY ORDER FOR NIGERIAN PORTS – UNDERSTANDING THE NPERA ACT 2026

/0 Comments/in , /by

BY SEUN TIMI-KOLEOLU & ENIOLA SOGBESAN

Introduction

On 6th August 2026, the Nigerian Midstream and Downstream Petroleum Regulatory Authority (“NMDPRA”) launched a stakeholder consultation in relation to the proposed Midstream and Downstream Petroleum Prevention of Anti-Competitive Practices and Behavior Regulations, 2026 (the “Regulations”). Comprising 138 provisions across 23 parts, the Regulations seek to introduce the first dedicated, detailed competition-law framework governing anti-competitive conduct in Nigeria’s midstream and downstream petroleum sector.

Historically, competition concerns in the sector including price-fixing, market allocation and abuse of dominant positions by vertically integrated operators were addressed only indirectly, through the general provisions of the Petroleum Industry Act and the oversight of the Federal Competition and Consumer Protection Commission (FCCPC”). The Regulations seek to close this gap by translating the PIA’s competition provisions into sector-specific rules, while establishing a coordination framework with the FCCPC through a recently signed Memorandum of Understanding.

In this newsletter, we examine the key provisions of the Regulations and highlight some of the legal and commercial considerations for operators.

Who Do the Regulations Apply To?

The Regulations apply broadly to licensees and permit holders operating across the midstream and downstream petroleum value chain. Specifically, they apply to:

  1. operators engaged in pricing, marketing and distribution of petroleum products (marketers and retailers);
  2. owners and controllers of essential petroleum infrastructure, including pipelines, storage terminals, jetties, bulk-loading facilities and depots;
  3. vertically integrated operators and their affiliates, including entities engaged in intra-group transactions; and
  4. operators participating in mergers, acquisitions, or joint ventures within the sector.

The regulatory focus is therefore not on any single category of licensee, but on any conduct, agreement or arrangement capable of preventing, restricting or distorting competition in the sector.

What are the Key Prohibitions?

  1. Prohibition on Anti-Competitive Conduct (Regulation 3)

The foundation of the regime is Regulation 3, which prohibits any conduct, agreement, arrangement, understanding, decision or practice that has the object or effect of preventing, restricting or distorting competition regardless of whether it is formalised in writing or conducted informally.

  1. Price-Fixing, Market Allocation and Bid-Rigging

Competing operators are prohibited from coordinating pump prices, ex-depot prices, margins, discounts, freight charges, supply or output levels, territories, customer allocation and tender submissions.

  1. Restrictive Commercial Arrangements

Exclusive supply agreements, long-term contracts, take-or-pay arrangements, tying and bundling, loyalty rebates, minimum-volume commitments, resale price maintenance and franchise restrictions may be scrutinised where they substantially lessen competition with focus is not on whether they foreclose market access or distort competitive conditions.

  1. Abuse of Dominance

The Regulations do not prohibit market dominance itself, only its abuse. Dedicated provisions address vertically integrated firms, affiliate transactions and cross-subsidisation.

  1. Infrastructure Access and Transparency

Controllers of essential infrastructure are prohibited from unjustifiably refusing, delaying or obstructing access by qualified third parties. Access must be transparent, non-discriminatory, and based only on legitimate technical, safety and creditworthiness considerations. Operators must also publish tariffs, fees and service conditions; hidden surcharges, secret discounts and undisclosed preferential arrangements are prohibited.

  1. Mergers and Digital Markets

The Regulations introduce a merger and acquisition review mechanism empowering the NMDPRA to assess transactions for effects on competition, market entry and consumer welfare, alongside emerging oversight of digital markets including shared platforms, data-sharing and algorithmic pricing risks.

Compliance Considerations

Pending finalisation of the Regulations, operators in the midstream and downstream sector should consider the following:

  1. Operators should audit supply agreements, distribution contracts and pricing arrangements with competitors for provisions that could be characterised as price-fixing, market allocation, or bid-rigging.
  2. Vertically integrated operators and infrastructure owners should evaluate whether their current market position could expose them to “abuse of dominance” scrutiny, particularly regarding third-party infrastructure access.
  3. Owners of pipelines, depots, terminals and jetties should ensure access terms are documented, published, and based on objective technical and safety criteria.
  4. Organisations should establish internal governance procedures including competition-law training and pricing-communication protocols to monitor ongoing compliance ahead of finalisation.
  5. Given that NMDPRA has invited stakeholder input on the clarity, practicality and impact of specific provisions, operators should consider making submissions to flag ambiguous provisions before the Regulations are finalised.

Penalties for non-compliance

The draft Regulations introduce significant sanctions for non-compliance. Operators found guilty of serious offences, including price-fixing, bid-rigging, market allocation and abuse of market dominance, may be fined between 3–5% of annual turnover. Persistent offenders may face licence suspension or revocation while the NMDPRA may impose daily penalties on operators that fail to comply or continue prohibited conduct.

Conclusion

The NMDPRA indicates it is actively reviewing submissions ahead of finalization. Therefore, stakeholders should prioritise reviewing their commercial arrangements, infrastructure access policies, and internal compliance frameworks.

Operators who engage proactively with the consultation process, and who position themselves for compliance ahead of finalisation, will be better placed to navigate this significant shift in Nigeria’s petroleum regulatory landscape.

NIGERIA’S ANTI-COMPETITION REGIME: KEY COMPLIANCE CONSIDERATIONS FOR MIDSTREAM AND DOWNSTREAM PETROLEUM OPERATORS IN NIGERIA

/0 Comments/in , /by

BY ADERONKE ALEX-ADEDIPE & OLUWAYEMI IBIRINDE

Introduction 

On 6th August 2026, the Nigerian Midstream and Downstream Petroleum Regulatory Authority (“NMDPRA”) launched a stakeholder consultation in relation to the proposed Midstream and Downstream Petroleum Prevention of Anti-Competitive Practices and Behavior Regulations, 2026 (the “Regulations”). Comprising 138 provisions across 23 parts, the Regulations seek to introduce the first dedicated, detailed competition-law framework governing anti-competitive conduct in Nigeria’s midstream and downstream petroleum sector. 

Historically, competition concerns in the sector including price-fixing, market allocation and abuse of dominant positions by vertically integrated operators were addressed only indirectly, through the general provisions of the Petroleum Industry Act and the oversight of the Federal Competition and Consumer Protection Commission (FCCPC”). The Regulations seek to close this gap by translating the PIA’s competition provisions into sector-specific rules, while establishing a coordination framework with the FCCPC through a recently signed Memorandum of Understanding. 

In this newsletter, we examine the key provisions of the Regulations and highlight some of the legal and commercial considerations for operators. 

Who Do the Regulations Apply To? 

The Regulations apply broadly to licensees and permit holders operating across the midstream and downstream petroleum value chain. Specifically, they apply to: 

  1. operators engaged in pricing, marketing and distribution of petroleum products (marketers and retailers); 
  2. owners and controllers of essential petroleum infrastructure, including pipelines, storage terminals, jetties, bulk-loading facilities and depots;
  3. vertically integrated operators and their affiliates, including entities engaged in intra-group transactions; and 
  4. operators participating in mergers, acquisitions, or joint ventures within the sector. 

The regulatory focus is therefore not on any single category of licensee, but on any conduct, agreement or arrangement capable of preventing, restricting or distorting competition in the sector. 

What are the Key Prohibitions? 

1. Prohibition on Anti-Competitive Conduct (Regulation 3) 

The foundation of the regime is Regulation 3, which prohibits any conduct, agreement, arrangement, understanding, decision or practice that has the object or effect of preventing, restricting or distorting competition regardless of whether it is formalised in writing or conducted informally. 

2. Price-Fixing, Market Allocation and Bid-Rigging 

Competing operators are prohibited from coordinating pump prices, ex-depot prices, margins, discounts, freight charges, supply or output levels, territories, customer allocation and tender submissions. 

3. Restrictive Commercial Arrangements 

Exclusive supply agreements, long-term contracts, take-or-pay arrangements, tying and bundling, loyalty rebates, minimum-volume commitments, resale price maintenance and franchise restrictions may be scrutinised where they substantially lessen competition with focus is not on whether they foreclose market access or distort competitive conditions. 

4. Abuse of Dominance 

The Regulations do not prohibit market dominance itself, only its abuse. Dedicated provisions address vertically integrated firms, affiliate transactions and cross-subsidisation. 

5. Infrastructure Access and Transparency 

Controllers of essential infrastructure are prohibited from unjustifiably refusing, delaying or obstructing access by qualified third parties. Access must be transparent, non-discriminatory, and based only on legitimate technical, safety and creditworthiness considerations. Operators must also publish tariffs, fees and service conditions; hidden surcharges, secret discounts and undisclosed preferential arrangements are prohibited. 

6. Mergers and Digital Markets 

The Regulations introduce a merger and acquisition review mechanism empowering the NMDPRA to assess transactions for effects on competition, market entry and consumer welfare, alongside emerging oversight of digital markets including shared platforms, data-sharing and algorithmic pricing risks. 

Compliance Considerations 

Pending finalisation of the Regulations, operators in the midstream and downstream sector should consider the following: 

  1. Operators should audit supply agreements, distribution contracts and pricing arrangements with competitors for provisions that could be characterised as price-fixing, market allocation, or bid-rigging. 
  2. Vertically integrated operators and infrastructure owners should evaluate whether their current market position could expose them to “abuse of dominance” scrutiny, particularly regarding third-party infrastructure access. 
  3. Owners of pipelines, depots, terminals and jetties should ensure access terms are documented, published, and based on objective technical and safety criteria. 
  4. Organisations should establish internal governance procedures including competition-law training and pricing-communication protocols to monitor ongoing compliance ahead of finalisation. 
  5. Given that NMDPRA has invited stakeholder input on the clarity, practicality and impact of specific provisions, operators should consider making submissions to flag ambiguous provisions before the Regulations are finalised. 

Penalties for non-compliance 

The draft Regulations introduce significant sanctions for non-compliance. Operators found guilty of serious offences, including price-fixing, bid-rigging, market allocation and abuse of market dominance, may be fined between 3–5% of annual turnover. Persistent offenders may face licence suspension or revocation while the NMDPRA may impose daily penalties on operators that fail to comply or continue prohibited conduct. 

Conclusion 

The NMDPRA indicates it is actively reviewing submissions ahead of finalization. Therefore, stakeholders should prioritise reviewing their commercial arrangements, infrastructure access policies, and internal compliance frameworks.  

Operators who engage proactively with the consultation process, and who position themselves for compliance ahead of finalisation, will be better placed to navigate this significant shift in Nigeria’s petroleum regulatory landscape.

FOREX TRADING IN NIGERIA: THE IMPLICATIONS OF SEC PROPOSED RULES ON ONLINE FOREX TRADING FOR TECHNOLOGY AND PLATFORM PROVIDERS

/0 Comments/in , /by

BY SEUN TIMI-KOLEOLU & PROMISE ITAH

Introduction

The Securities and Exchange Commission (“SEC”) has proposed rules on Online Forex Trading and Contracts for Difference (“CFDs”) (the “Proposed Rules”), introducing a regulatory framework for businesses involved in the provision of online Forex and CFD trading services in Nigeria.

The Proposed Rules will affect not only Forex brokers and CFD providers, but also the companies that provide the technology they use. This includes companies that provide the websites and apps where users open trading accounts; check currency and asset prices; place trades; and manage their investments. It may also include companies that host these platforms or provide the technology and systems that allow them to operate.

In this newsletter, we highlight key provisions of the Proposed Rules relevant to businesses that provide technology or platforms for online Forex and CFD trading.

What are Online Forex Trading and CFDS?

Under the Proposed Rules, Forex/FX/Foreign Exchange means the exchange of one national currency for another. Online forex trading involves trading foreign currencies through an online platform.

A Contract for Difference (CFD) is a derivative that allows a person to trade based on changes in the price of an underlying asset without owning the asset.

Key Highlights of the Proposed Rules

  1. Technology and Platform Providers Within the Regulatory Framework

Under the Proposed Rules, technology and platform providers are recognised as a distinct category of regulated persons. This category appears broad enough to cover businesses that provide trading infrastructure, software, platforms, systems or other technology used in connection with online Forex and CFD trading.

The Proposed Rules also apply to offshore businesses that target or provide services to Nigerian residents. This may arise where a platform permits Nigerian residents to open accounts, advertises its services to Nigerians, uses Nigerian currency or references, engages Nigerian influencers or affiliates, or otherwise demonstrates an intention to serve the Nigerian market.

Accordingly, a technology provider may need to assess its activities carefully where its platform is used by a Forex broker or CFD operator serving Nigerian residents. The fact that the provider does not deal directly with clients or execute trades may not, by itself, take it outside the scope of the Proposed Rules.

  1. Registration and Capital Requirements

A person may not carry on, or hold itself out as carrying on, the business of a technology or platform provider within the scope of the Proposed Rules without registration with the SEC.

For technology and platform providers, the Proposed Rules contemplate a minimum paid-up capital of ₦5 billion. The provider must also be incorporated in Nigeria or be a foreign company with an appropriate local presence in Nigeria.

The proposed registration fees comprise:

  • Application fee – ₦100,000;
  • Processing fee – ₦300,000; and
  • Registration fee for a Category C technology or platform provider – ₦30 million.

In addition, a registered provider would be required to maintain professional indemnity insurance of not less than 20% of the applicable minimum capital per claim, or provide an equivalent security acceptable to the SEC.

  1. Operational and Technology Standards

The Proposed Rules place significant emphasis on the reliability, security and resilience of trading platforms. Technology providers would be expected to maintain systems that support the continuous and orderly operation of trading activities. The key requirements include:

  • Platform availability: Platforms must maintain a minimum uptime of 99.5% during trading hours.
  • Cybersecurity: Providers must have appropriate security measures in place, including end-to-end encryption of client and trade data, multi-factor authentication, regular penetration testing, and systems for monitoring and responding to security threats.
  • Business continuity and disaster recovery: Providers must maintain business continuity and disaster recovery arrangements, test these arrangements annually and submit the relevant certification to the SEC.
  • Record-keeping: Providers must retain audit trails of transactions and other relevant activities for at least seven years. Records must be readily retrievable within 24 hours and may include client information, orders, transactions, confirmations, electronic communications, financial records, AML records and risk disclosures.

These requirements may have implications for the design and operation of trading platforms and should be considered in the contractual arrangements between technology providers and the brokers or other regulated entities using their systems.

  1. Data Protection and Data Localisation

The Proposed Rules also set requirements for the storage and protection of client and trading data. Client order data must be stored in Nigeria or another jurisdiction approved by the SEC, in line with applicable data protection requirements. Technology providers may therefore need to review their data hosting arrangements, third-party access and cross-border data transfers.

  1. White-Label Platforms and Outsourced Technology

The Proposed Rules are also relevant to businesses that provide white-label platforms or outsourced technology solutions. Where a provider supplies the infrastructure used by a broker or trading operator, the parties will need to consider how responsibility for regulatory compliance is allocated. This should include responsibility for:

  • platform availability and performance;
  • cybersecurity and access controls;
  • data storage and processing;
  • incident reporting;
  • recordkeeping and audit trails;
  • business continuity and disaster recovery;
  • regulatory inspections and information requests;
  • use of subcontractors and external technology providers; and
  • suspension, termination or migration of the platform.

The Proposed Rules require prior SEC approval for certain material changes, including changes to a trading platform or technology provider. This means that brokers and other regulated entities may need to obtain SEC approval before changing their technology providers or making significant changes to their trading platform.

Technology agreements should therefore be reviewed to ensure that they contain appropriate provisions dealing with regulatory cooperation, audit rights, service levels, incident escalation, data access, business continuity and orderly transition.

  1. Incident Reporting and Regulatory Cooperation

A technology provider would be required to notify the SEC within 24 hours of a material system breach, outage or cybersecurity incident.

This requirement creates a need for clear internal escalation procedures and contractual reporting arrangements. A broker may not become aware of a system incident immediately, while a technology provider may not have sufficient information to determine whether an incident is material from a regulatory perspective.

Technology providers and their regulated clients should therefore agree in advance on:

  • What constitutes a reportable incident;
  • How quickly incidents must be escalated;
  • Who is responsible for notifying the SEC;
  • The information to be included in an incident report;
  • How affected clients will be notified; and
  • The steps required to contain, investigate and remedy the incident.

The Proposed Rules also contemplate independent systems audits and penetration testing reports for proprietary and white-labelled platforms. Providers should expect increased scrutiny of their technology architecture, security controls, access management, development processes and third-party dependencies.

  1. What Technology Providers Should Consider

Businesses providing technology or platform services to online Forex and CFD operators should begin reviewing their current operations against the proposed framework. In particular, they should:

  • assess their regulatory classification and determine whether their services fall within the proposed definition of a technology or platform provider;
  • review their Nigerian market exposure, including whether their platforms are accessible to Nigerian residents or marketed through Nigerian brokers, affiliates, influencers or other intermediaries;
  • evaluate their capital and local presence requirements, particularly where they operate through a foreign company or provide services on a white-label basis;
  • review their technology infrastructure, including uptime, encryption, authentication, monitoring, penetration testing and incident response arrangements;
  • assess their data arrangements, including data hosting locations, backups, cross-border transfers, subcontractors and compliance with applicable data protection laws;
  • update their contractual arrangements with brokers and other regulated entities to address service levels, audit rights, incident reporting, regulatory access, business continuity and liability;
  • prepare for enhanced recordkeeping and audit requirements, including the retention and retrieval of client, transaction and system records for at least seven years.

Conclusion

The SEC’s Proposed Rules signal closer regulation of online Forex and CFD trading in Nigeria, including the technology infrastructure supporting such activities. While the provisions highlighted in this newsletter are not exhaustive, the proposed requirements may have significant implications for both local and foreign businesses operating in this space.

Businesses should therefore review their regulatory position and relevant operations ahead of the final rules. As the proposals remain subject to change, businesses should continue to monitor developments and assess any implications based on the nature of their services and Nigerian market exposure.

NERC’S TRANSFER OF AKWA IBOM’S ELECTRICITY OVERSIGHT: WHAT THIS MEANS FOR LICENSEES, INVESTORS AND CONSUMERS

/0 Comments/in , /by

BY ADERONKE ALEX-ADEDIPE & EFE OKPARAVERO

 

Introduction

On 18 August 2026, the Nigerian Electricity Regulatory Commission (“NERC”) issued Order No. NERC/2026/087, transferring regulatory oversight of Akwa Ibom State’s (“the State”) intrastate electricity market to the Akwa Ibom State Electricity Regulatory Commission (“AKSERC”).

The Order was issued pursuant to Section 230(2) of the Electricity Act 2023 (“Electricity Act”), which provides, in essence, that a State may regulate intrastate electricity activities and upon the state’s request and satisfaction of the statutory conditions, NERC may transfer regulatory oversight of intrastate electricity activities to the state regulator.

In furtherance of the Electricity Act, in January 2025, the Akwa Ibom State Electricity Law was enacted, establishing the AKSERC, while AKSERC also formally engaged NERC on the development and transition of the State electricity market. Following these steps, NERC issued the Order, marking the commencement of the transition of regulatory oversight to AKSERC.

The Nature and Impact of the Transfer

The transfer moves regulatory oversight only in respect of intra-state electricity activities from NERC to AKSERC. This means that electricity operators whose activities fall exclusively within the State, will increasingly deal with the State regulator in respect of licensing, regulation, compliance and other matters falling within the State electricity market.

The transfer, however, is not yet operational, as the Order provides for a transition period ending on 17 February 2027, during which certain implementation steps must still be completed.

Given that the Port Harcourt Electricity Distribution Plc (“PHEDC”) currently oversees electricity distribution in the State, NERC has mandated PHEDC to incorporate a subsidiary, i.e  “PHEDC SubCo”, which will assume responsibility for electricity supply and distribution within the State.

Implications for Licensees and Operators

For existing licensees and operators, the focus is on the regulatory transition, which will require businesses to assess their existing licences, regulatory obligations, contracts, assets and operating arrangements against the emerging regulatory framework.

Existing licensees should therefore undertake a regulatory-gap assessment in respect of their regulatory and contractual obligations.

A New Regulatory Environment for Investors

For investors, the transfer presents both opportunities and potential regulatory risks. The establishment of a dedicated State regulator provides greater control over the development of its electricity market and creates an institutional framework through which the State can facilitate investment in generation, distribution and supply infrastructure.

AKSERC has itself indicated that it intends to adapt regulatory frameworks to the State’s specific electricity needs, while NERC has committed to providing technical assistance during the transition. This could make the State particularly attractive to investors interested in the State’s electricity ecosystem.

In the same vein, the transition introduces a new set of questions for investors which would need to be determined including: (i) whether its proposed activities are intrastate or interstate in character; (ii) whether the nature of activities requires a State or federal licence; (iii) which regulator has tariff and consumer-protection jurisdiction; (iv) whether access to the national grid is involved and (v) how existing federal licences and contractual rights will be treated during the transition.

For investors therefore, regulatory certainty will be as important as the availability of opportunities.

Implication for Consumers

For consumers, the most important point is that the transfer does not immediately give effect to a change in tariffs. PHEDC will continue to supply meters and bill consumers during the transition. These operational responsibilities are, however, expected to be transferred to PHEDC SubCo as part of the transition process. The longer-term significance is the creation of a regulator with a direct mandate over the State’s electricity market as upon completion of the transition by February 2027, regulatory responsibility for its intrastate electricity market will pass from NERC to AKSERC. If effectively implemented, State-level regulation could improve service quality, electricity access, consumer complaints and investment in underserved areas.

Next Steps for Operators

The transition period presents an opportunity for existing and prospective operators to prepare before the February 2027 completion deadline. Electricity operators in the State should consider:

  1. Reviewing regulatory status: Determine whether existing licences remain applicable and identify any new State licensing requirements.
  2. Mapping regulatory jurisdiction: Separate activities falling under AKSERC’s intrastate jurisdiction from those remaining under NERC.
  3. Reviewing contracts: Assess existing PPAs, supply agreements, distribution arrangements, financing documents and other contracts for provisions affected by the transition.
  4. Assessing compliance requirements: Monitor AKSERC’s emerging regulations, licensing procedures, tariff frameworks and consumer-protection requirements.
  5. Reviewing investment structures: Prospective investors should assess whether their proposed structures are appropriately aligned with the State and federal regulatory framework.

Conclusion

The Electricity Act provides the legal basis for States to establish and regulate intrastate electricity markets, while NERC continues to perform a central regulatory role over electricity activities that remain interstate, international in character or involves the national grid.

Consequently, businesses operating across multiple States may face a more complex regulatory landscape. This makes regulatory structuring and licensing analysis increasingly important for operators.

The transfer of regulatory oversight to AKSERC marks a further step in the decentralisation of Nigeria’s electricity market, with Akwa Ibom becoming the 17th State to assume regulatory oversight of its electricity market.

The transition by 2027 will therefore be particularly important, as the impact of decentralisation will not be determined solely by the transfer of regulatory authority, but by how effectively AKSERC exercises that authority, how clearly the respective roles of AKSERC and NERC are defined, and whether the transition ultimately delivers improved service and greater consumer satisfaction.

 

NIGERIA’S PROPOSED RULES ON DIGITAL AND VIRTUAL ASSETS: KEY PROVISIONS AND IMPLICATION FOR BUSINESSES

/in , /by

BY SEUN TIMI-KOLEOLU & HILLARY OKOROTIE

Introduction 

On August 20, 2026, the Securities and Exchange Commission (“SEC”) published the Proposed Rules on Digital and Virtual Assets Operations, Custody and Markets (the “Proposed Rules”). The Proposed Rules seek to establish a comprehensive regulatory framework for digital and virtual asset activities in Nigeria, including the issuance, offering, trading, custody, transfer and settlement of digital and virtual assets. 

The Proposed Rules set out: the categories of activities to which they apply; the prescribed requirements for conducting business in relation to digital and virtual assets; and regulatory requirements relating to the issuance and trading of digital assets. 

In this newsletter, we provide an overview of the key provisions of the Proposed Rules and their potential implication for businesses operating within Nigeria’s digital and virtual asset ecosystem. 

Key Provisions and Implication of the Proposed Rules 

Where the proposed rules are implemented the following are key provisions that players in the digital and  virtual assets space should take note of when operating in the Nigerian market. 

1. Application of the Proposed Rules 

The Proposed Rules will apply to persons and businesses operating in Nigeria, as well as persons providing services to Nigerian residents or the Nigerian market through digital channels in relation with the issuance, trading, custody and management of digital and virtual assets. 

The Proposed Rules will also apply to persons and entities facilitating any aspect of digital and virtual asset services, including Virtual Asset Service Providers (“VASPs”) and Digital Asset Custodians(“DAO”). 

2. Obligations of Regulated Entities 

Regulated entities are required to comply with various obligations in the conduct of their business and in the issuance, offering, and trading of digital assets in Nigeria. These obligations include, amongst others, the following: 

  1. Advertisement and Promotion: In connection with the issuance and offering of digital assets in Nigeria, entities must ensure that no publication, advertisement, or promotional material is made in respect of a digital asset unless the asset has been duly registered with SEC. Where an entity advertises or promotes a registered digital asset, such advertisement or promotional content must be accurate, fair, and not misleading.
  2. Changes to the Structure of the Entity: Where there are material changes to the structure or operations of a regulated entity, including changes to its ownership, governance structure, technology architecture, or business model, the entity must obtain SEC’s prior approval before implementing such changes. In addition, any cybersecurity incident, data loss, or loss of assets must be reported to SEC within twenty-four hours of such occurrence.
  3. Dispute and Conflict of Interest Management: Entities engaged in the trading of digital assets must maintain a comprehensive framework for receiving, handling, and resolving customer complaints. They are also required to establish and maintain appropriate procedures for identifying, managing, and mitigating conflicts of interest arising in connection with their digital asset trading activities.
  4. System Access and Transaction Monitoring: SEC may require regulated entities to provide API-based access to their financial, operational, and transaction data for regulatory monitoring and supervisory purposes. The Proposed Rules further require entities to implement systems capable of monitoring and reporting transactions involving Nigerian residents. In respect of cross-border transactions, entities must implement systems that maintain designated transaction wallets for domestic and cross-border asset flows. Such systems must also ensure that all inflows into and outflows from Nigeria are traceable to identifiable users.

3. Disclosure Requirements for the Issuance of Digital Assets 

The Proposed Rules require the disclosure of all material information relating to a digital asset prior to its issuance. An issuing entity is required to prepare a white paper containing the issuers information, characteristics, offer structure of the digital asset, and other material information to enable prospective investors make informed investment decisions. The whitepaper must be filed with SEC, and the issuing entity must obtain a no-objection or approval from SEC before offering the digital asset to the public. 

The issuing entity and its officers will be responsible for any misrepresentation or omission of material information contained in the whitepaper. Where there is a material change to the information relating to the digital asset following SEC’s no-objection or approval, the issuing entity will be required to file a supplementary or amended whitepaper with SEC and suspend further issuance of the digital asset pending compliance with the applicable requirements. 

4. Issuance of the Digital Assets 

The Proposed Rules provide that, for an asset to be eligible for issuance, the rights and obligations attached to the asset must be clear, the structure of the asset must be transparent, and the risks must be adequately disclosed. 

Digital assets shall be categorized either as Asset-Referenced Tokens, Asset-Backed Tokens, or other digital assets, including cryptocurrencies and utility tokens. Assets that are anonymous, exhibit a fraudulent token structure, or constitute an unbacked stablecoin will be prohibited from issuance. The asset must also be offered through a Digital Asset Offering Platform approved by SEC. 

5. Registration Under the Proposed Rules 

An entity intending to register under the Proposed Rules must apply to first participate in SEC’s Accelerated Regulatory Incubation Programme (“ARIP”). Following an application under the ARIP, SEC may grant the applicant an Approval-in-Principle to commence operations subject to the conditions prescribed by SEC. The Approval-in-Principle will be valid for a period of two years, after which SEC may require the entity to apply for full registration. 

SEC may, in certain circumstances, permit an applicant to bypass the ARIP process. This may apply where the applicant is a registered capital market operator, a registered (“VASP”), or a subsidiary of a licensed financial institution. 

To qualify for registration under the Proposed Rules, an entity must, amongst  other requirements, be incorporated in Nigeria in accordance with the Companies and Allied Matters Act, 2020. Its Chief Executive Officer and other principal officers must be resident in Nigeria, and the entity must maintain a registered office address in Nigeria. The applicant must also satisfy other registration and regulatory requirements prescribed by SEC. 

Conclusion 

SEC’s objective under the Proposed Rules is to establish a comprehensive regulatory framework for the digital assets market in Nigeria. Notably, the framework extends beyond the regulation of intermediaries engaged in the trading of digital assets to also encompass digital asset issuers and other relevant participants in the digital asset’s ecosystem. 

If implemented, the Proposed Rules will have significant implications for foreign entities seeking to issue digital assets in the Nigerian market. Such entities may be required to comply with requirements relating to the incorporation of a domestic entity where the parent company is incorporated outside Nigeria, as well as requirements concerning the residency of principal officers in Nigeria.

NIGERIA’S NATIONAL DIGITAL CLOUD POLICY: WHAT BUSINESSES NEED TO KNOW

/in , /by

BY ADERONKE ALEX-ADEDIPE & ENIOLA SOGBESAN

Introduction

On 17 August 2026, the Federal Government of Nigeria introduced the National Digital Cloud Policy (the “Policy”), replacing the Nigeria Cloud Computing Policy 2019. The Policy is effective immediately, save for the sovereignty provisions contained in Part III, which remain subject to Presidential approval.

The Policy represents a significant evolution in Nigeria’s approach to cloud computing. While the 2019 policy primarily focused on encouraging the adoption and use of cloud technology, the Policy supports the deliberate development of a domestic cloud and data infrastructure ecosystem in Nigeria.

Among other objectives, the Policy seeks to –

  1. attract investment in cloud and data infrastructure;
  2. develop Nigeria as a regional digital services exporter;
  3. expand and diversify domestic capacity;
  4. modernize government service delivery and
  5. secure government and regulated data proportionately.

In this newsletter, we examine the key provisions of the Policy and consider their practical implications for cloud service providers, data centre operators, regulated entities and businesses that use cloud services in Nigeria.

Scope and Application

The Policy establishes a tiered framework which can be broadly understood across three distinct categories:

  1. General Market Framework: Parts I and IV of the Policy establish the overarching framework applicable to participants in Nigeria’s cloud market. These provisions address matters such as investment, trade, market development and the implementation of the Policy.
  2. Public Sector: Part II of the Policy is applicable to Federal Ministries, Departments, Agencies and entities exercising public functions on their behalf. State Governments, the Federal Capital Territory, and Local Governments may participate voluntarily under the Policy.
  3. Sovereign Data: Part III of the Policy is specifically applicable to sovereign data. Sovereign Data in the Policy refers to-
    i. data generated by the Federal Government, its MDAs, or by entities performing public functions on their behalf; and
    ii. data generated pursuant to a Federal regulation, license, or directives issued by the Federal Government and such data must be expressly designated as sovereign.

Key Policy Incentives

  1. Investment Incentives
    Qualifying Investment may benefit from a range of incentives such as –

    • import duty exemptions, waivers, or concessions on data centre equipment and
    • access to priority status and equivalent tax incentives for qualifying strategic digital infrastructure projects.
  2. Regulatory Facilitation and Investment Certainty
    The Policy recognizes regulatory friction as a material deterrent to infrastructure investment. Accordingly, the Federal Government will among others–

    • coordinate investment promotion to eliminate duplicative approval requirements and reduce administrative delay;
    • establish a single coordinated facilitation point for qualifying cloud and data centre investments; and
    • publish the licensing, compliance, and operational requirements applicable to cloud and data infrastructure investments.
  3. Capital Mobility and Foreign Exchange Incentives
    To ensure the effective realization and repatriation of investments, the Policy ensures the following:

    • lawful repatriation of capital, profits, and dividends in accordance with applicable investment and foreign exchange regulations;
    • prompt issuance of certificates for qualifying investments to secure repatriation rights; and
    • all earnings from cloud and data services provided to customers outside Nigeria will be treated as export earnings eligible for foreign exchange and export incentives.
  4. Energy Access
    The Policy provides a framework to support cloud and data centers in accessing reliable electricity, including opportunities to utilize renewable and alternative energy solutions.Importantly, the beneficiaries of these incentives are required to commit to capability development programmes, including knowledge transfer and skills development to Nigerians.

Eligibility and Qualification

To be eligible to benefit from incentives under the Policy, cloud and data centers must among other considerations demonstrate –

  • deployment, or committed planned deployment, of qualifying infrastructure in Nigeria;
  • registration under the Digital Infrastructure Assurance Registration scheme;
  • participation in the National Digital Marketplace framework, where seeking government business;
  • alignment with national interoperability requirements; and
  • compliance with applicable data protection, cybersecurity, and consumer protection obligations.

Sovereign Data Classification

As noted above, Part III of the Policy is applicable to sovereign data which is categorized into four–

Level Category Data Type Hosting Requirement
4

 

 Classified National security, defence and critical infrastructure Hosted exclusively on infrastructure physically located in Nigeria under sovereign control, with processing within Nigeria.
3

 

 Highly Sensitive Sensitive personal data, regulated data including financial, biometric, identity and health data. Stored in Nigeria, with continuous sovereign recovery capability; processing in approved environments subject to safeguards.
2 Sensitive Internal government operational data, administrative records, and data that could cause moderate risk if disclosed May be deployed in hybrid environments, including approved international infrastructure, subject to prior authorization.
1 Open Public access data or low risk information with minimal data if disclosed.

 

 May be hosted on any compliant infrastructure without residency restriction.

 

Implementation Timeline

The Policy will be implemented in phases with an overall timeline of 24 months from the issuance date.

Next Steps

  1. Cloud providers and data centre operators – Assess eligibility for incentives and the process for registration under the Digital Infrastructure Assurance Registration scheme.
  2. Regulated entities – While the Policy does not impose general data localization requirements, however given that the category of what constitutes “regulated data” is not exhaustive and includes financial, biometric, identity and health data, this data category should be closely monitored where there is the expansion of the data types.
  3. Businesses using cloud services: All commercial data remain unaffected by the sovereignty provisions as the Policy provides regulatory certainty for continued use of international cloud services.

Conclusion

The introduction of the National Digital Cloud Policy is an important shift in Nigeria’s digital infrastructure and data governance landscape. By combining investment incentives, regulatory facilitation, domestic infrastructure development and a risk-based approach to sovereign data, the Policy seeks to strengthen Nigeria’s cloud ecosystem while promoting secure and resilient digital services.

The practical impact of the Policy will depend largely on the development of clear implementation guidelines, the achievement of the key performance indicators set out in the Policy, and the Presidential approval of the sovereignty provisions in Part III.

The Policy presents significant opportunities for investment, innovation and digital transformation. Its success, however, will require sustained collaboration among government and other stakeholders to ensure that Nigeria’s cloud infrastructure develops in a secure and commercially viable manner.

AI REGULATION IN THE EU AND NIGERIA: AI WATERMARKING

/in , /by

BY SEUN TIMI-KOLEOLU & OLUWAYEMI IBIRINDE

INTRODUCTION

On 2 August 2026, the transparency obligations under the European Union Artificial Intelligence Act (the “EU AI Act”) became applicable. These include requirements under Article 50 for certain AI-generated or manipulated content to be identifiable through machine-readable markings and, in specified circumstances, disclosed to users.

The effect of these developments’ cuts across global AI use and will also have implications for Nigerian businesses, particularly those using AI services provided by global technology companies or operating across borders. This is underscored by the participation of about 190 organisations, including major AI providers such as Anthropic, Google, Meta, Microsoft, Mistral and OpenAI, in the European Commission’s Code of Practice on Transparency of AI-Generated Content.

We therefore consider it important to highlight this development and its implication for Nigerian businesses, while examining Nigeria’s existing regulatory framework for AI use and the need for a more comprehensive AI governance framework.

WHAT ARE THE EFFECTS OF THE EU AI WATERMARKING REQUIREMENT?

The introduction of AI-generated content marking and disclosure requirements has several implications for businesses as follows:

  1. Cross-border Application: The EU AI Act applies to any AI tool or output used in the European Union, even for companies operating from outside the EU. Accordingly, Nigerian companies providing AI services or outputs for use in the EU may be subject to applicable transparency requirements, including the requirement to watermark AI-generated content.
  2. Dilution of Original Ownership: Users both inside and outside the EU using AI tools need to be aware that once original human ideas are fed into an AI system, the resulting output gets watermarked and may make it difficult for the creator to prove ownership of their underlying intellectual property or demonstrate that the core work was human authored
  3. Consumer protection and fraud prevention: It is expected that, with the use of AI watermarks, AI-generated content will be more readily identifiable, and therefore support the identification of deepfakes, impersonation, fraudulent content, and other forms of deception.

HOW IS AI REGULATED IN NIGERIA

Nigeria has no single comprehensive AI statute like the EU AI Act. AI-related obligations instead sit within existing laws and other AI governance structures as follows:

  1. Nigeria Data Protection Act (NDPA) Data protection:
    The key regulation in Nigeria governing the use of AI is the Nigeria Data Protection Act, 2023 (NDPA). While Nigeria has no comprehensive AI-specific law comparable to the EU AI Act, the NDPA regulates AI use where personal data is involved. This is particularly important where businesses use foreign AI providers, as these services may involve the processing or transfer of personal data outside Nigeria. Businesses should therefore assess their AI tools for compliance with the NDPA and applicable cross-border data protection requirements.It also clearly restricts and places safeguards around decisions made solely through automated processing where such decisions may have legal or similarly significant effects on individuals, reinforcing the need for appropriate human oversight and transparency.
  2. Federal Competition and Consumer Protection Act (FCCPA)
    Another regulation relevant to the use of AI in Nigeria is the Federal Competition and Consumer Protection Act, 2018 (FCCPA). The FCCPA sets clear consumer protection requirements that apply to AI-driven marketing, pricing, and other consumer-facing activities. It prohibits false, misleading, or deceptive representations and unfair contract terms. AI-generated content, recommendations and decisions must comply with these consumer protection standards.
  3. SEC Rules on Robo-Advisory Services
    Similarly, the SEC Rules on Robo-Advisory Services regulate the use of automated, algorithm-based tools to provide investment advice. The Rules require robo-advisers to identify and mitigate algorithmic bias and clearly disclose to clients how the technology works, including its assumptions, limitations and associated risks. Therefore, where AI is used to provide investment advice, compliance with these requirements is mandatory.
  4. Copyright Act, 2022
    The Copyright Act, 2022 protects original works created by human authors but does not expressly address AI-generated works or determine authorship where content is created by AI. Businesses using AI-generated content should therefore consider copyright ownership and infringement risks, particularly where AI tools generate or reproduce existing protected works.
  5. The National Artificial Intelligence Strategy
    The National Artificial Intelligence Strategy (NAIS) provides the policy foundation for responsible, ethical and inclusive AI adoption in Nigeria. While it does not create binding AI-specific obligations in the same manner as the EU AI Act, it provides a framework for the development of Nigeria’s AI governance and regulatory approach.
  6. The National Digital Economy and E-Governance Bill, 2025
    The National Digital Economy and E-Governance Bill, 2025, which is not yet law, proposes a more comprehensive framework for AI governance in Nigeria. It includes provisions on AI risk classification, monitoring of AI-related risks, accreditation of independent AI system auditors, inspections, audits and enforcement. If enacted, the Bill could significantly strengthen Nigeria’s regulatory framework for AI and move the country closer to a dedicated AI governance regime.Taken together, these instruments demonstrate that Nigeria currently regulates aspects of AI use through existing laws and emerging policy frameworks but does not yet have specific requirements for AI watermarking comparable to those under the EU AI Act.

CONCLUSION

The transparency requirements under the EU AI Act marks a significant shift towards more accountable and traceable AI use, with implications extending beyond the EU as global AI providers adapt their products and compliance practices to emerging regulatory standards. While Nigeria already has several laws and policy instruments that regulate aspects of AI use, it would benefit from a comprehensive AI governance framework that brings these obligations together, provides greater regulatory certainty and addresses AI-specific risks.

As the regulatory landscape evolves, it is important for businesses to take a proactive approach to AI compliance by applying appropriate human oversight and seeking professional advice when adopting or deploying AI technologies.

WHEN THE REGULATOR TAKES THE BOARD: THE LEGAL LIMITS OF NERC’S INTERVENTION

/in , /by

BY ADERONKE ALEX-ADEDIPE & EFE OKPARAVERO

Introduction

On 10 August 2026, the Nigerian Electricity Regulatory Commission (“NERC”) issued Order No. NERC/2026/086 in respect of Kaduna Electricity Distribution Plc (“KAEDC”), dissolving its existing board and appointing an interim board of “Special Directors” to oversee the company. NERC has also appointed an Administrator and commenced a 12-month process aimed at identifying a new core investor for KAEDC.

The intervention follows what NERC describes as a “grave situation”, including prolonged regulatory and market defaults, inadequate investment, operational weaknesses and significant outstanding market obligations.

The Order raises an important question for Nigeria’s electricity sector, which is how far can NERC go in taking control of a privately owned electricity distribution company without crossing the line between regulatory intervention and corporate ownership?

Taking control is not taking ownership

Section 75 of the Electricity Act, 2023 (“Electricity Act”) permits NERC, following an inquiry into the conduct or affairs of a licensee, to intervene where it determines that the licensee is in a “grave situation”.

The statutory triggers include;

  • an inability to discharge obligations under the Act or licence terms,
  • prolonged default in complying with statutory or regulatory obligations,
  • a protracted management crisis detrimental to shareholders, consumers or the operation of the undertaking, or
  • insufficient assets to meet liabilities with an imminent risk of receivership.

Where these circumstances exist, NERC is empowered to issue an interim order dissolving and removing the board and appointing Special Directors and an Administrator to manage the undertaking, notwithstanding anything contained in any written law and the memorandum and articles of association of the undertaking/licensee.

Accordingly, while the usual rights of shareholders to appoint or remove directors are displaced for as long as the intervention remains in force, the intervention does not transfer the shareholders’ ownership of KAEDC to NERC. The shareholders retain their shares and their underlying proprietary interests. What changes is the control over the affairs of the licensed undertaking.

Implications of an unsuccessful intervention

By the provisions of the Electricity Act, where the state of affairs of the licensee does not improve after NERC has taken the appropriate measures, NERC shall revoke the licence.

The Act therefore contemplates progression from regulatory intervention to licence revocation where the intervention fails, and ultimately to the sale and transfer of the undertaking. It provides  for the sale and transfer of the undertaking and addresses the treatment of liabilities and security interests.

Accordingly, if the intervention fails and a core investor has been identified, NERC may in line with the Electricity Act, proceed to revoke KAEDC’s licence and invoke the statutory process for the sale of the undertaking. This must however follow the statutory process:

  1. Regulatory intervention: This is the stage KAEDC is currently at and is critical to the preservation of its existing shareholding. At this stage, the focus is on addressing the circumstances that gave rise to the intervention and restoring the undertaking to a viable position.
  2. Licence revocation: If the regulatory intervention fails and the underlying issues are not resolved, NERC may revoke KAEDC’s licence in accordance with the Electricity Act. Revocation would trigger the statutory process for dealing with the undertaking.
  3. Compulsory sale: Following the licence revocation, NERC shall invoke the statutory sale mechanism under Section 77 of the Electricity Act and direct the sale of the undertaking.

Implications of the Intervention for KAEDC’s Creditors

The intervention has immediate implications for KAEDC’s creditors. While NERC has not revoked KAEDC’s licence or commenced the statutory process for the sale of the undertaking, the Order places KAEDC under regulatory control and introduces measures governing the company’s affairs during the intervention period.

For example, the Order directs the Corporate Affairs Commission not to register any change in KAEDC’s shareholding or directorship during the intervention period without NERC’s prior written approval. NERC has also directed the Administrator, Bureau of Public Enterprises, Nigerian Bulk Electricity Trading Plc, Nigerian Independent System Operator and other material creditors to reconcile KAEDC’s liabilities and file a liability-management plan with the Commission within 90 days from the commencement of the Order. This means that creditors should endeavour to file their interests with the Commission. The Order further provides that the liability-management plan may allow for interim warehousing of the liabilities. Under this arrangement, such warehoused liability would not be immediately enforceable but temporarily preserved for later settlement as part of the sale transaction. The warehoused liabilities would need to be disclosed in the transaction documents in relation to the sale, and prospective investors would be required to set out in their bids how they propose to settle those liabilities.

The above becomes even more significant if NERC proceeds to a statutory sale as the Electricity Act provides that the new purchaser of the undertaking gets it free of KAEDC’s existing debts and other encumbrances. Therefore, the creditors are precluded from filing any claims against the undertaking or its assets after the sale. Instead, they must recover what they are owed from the funds paid for the purchase of the undertaking, according to their order of priority.

In the interim, however, the key point is that KAEDC is in a regulatory intervention, not yet a statutory sale.  Hence, Creditors should seek to have their interests expressly captured in the liability-management plan, where they can be warehoused and settlement provided for in the event of a sale.  If they fail to do so, their principal avenue for recovery may be limited to the purchase price paid by the purchaser, distributed in accordance with the applicable order of priority, which may ultimately be insufficient to satisfy their outstanding debts.

The legal limits of NERC’s power

NERC’s intervention powers are broad, but they are not unfettered. Their exercise remains subject to the statutory framework established by the Electricity Act. In particular:

  1. Statutory threshold: There must be a proper basis for concluding that the licensee is in a “grave situation” within the meaning of section 75 of the Electricity Act with at least one of the four statutory triggers identified above being present.
  2. Statutory purpose: The intervention must be directed towards the statutory objectives underlying section 75 of the Electricity Act, including maintaining the continuity of electricity supply and resolving the particular statutory trigger that warranted the regulatory intervention.
  3. Legal constraints: NERC’s exercise of its powers remains subject to applicable legal principles. Accordingly, issues of compliance with statutory preconditions, procedural requirements, and the rationality of the decision may arise in any litigation challenging the intervention.

These limitations do not, however, mean that NERC requires shareholder approval before exercising its power to remove or replace a licensee’s board.

Recommendations

  1. For KAEDC and its shareholders: KAEDC and its shareholders should closely monitor the intervention and ensure strict compliance with the requirements of the Order. In particular, they should obtain legal advice on the extent to which the intervention affects existing shareholder rights, board powers, contractual arrangements and proposed changes to the company’s shareholding or directorship.
  2. For creditors: Creditors should undertake an immediate review of their existing exposures to KAEDC, including the nature and enforceability of any security interests. They should also assess the effect of the Order on enforcement rights and engage with the liability-management process within 90 days as directed by NERC, to ensure that their claims are properly recognised and protected.
  3. For NERC: NERC should ensure that the intervention remains closely tied to the statutory conditions and objectives under section 75 of the Electricity Act. Any further measures taken during the intervention should have a clear statutory basis and be implemented in a manner that provides sufficient certainty to KAEDC, its shareholders, creditors and prospective investors.
  4. For prospective investors: Potential investors should conduct enhanced legal and regulatory due diligence before committing to KAEDC. This should extend beyond KAEDC’s financial position to include its regulatory obligations, outstanding liabilities, existing security interests, shareholder structure and the statutory implications of any subsequent licence revocation or sale.
  5. For other DisCos and their stakeholders: Other electricity distribution companies should treat the KAEDC intervention as a regulatory warning. DisCos should strengthen compliance, investment, governance and financial-management frameworks to address regulatory and market defaults before they develop into circumstances capable of triggering intervention under section 75 of the Electricity Act.
  6. For policymakers and regulators: The KAEDC intervention also highlights the need for greater clarity around the relationship between regulatory intervention, shareholder ownership, creditor rights and the proposed replacement of a core investor. Clearer guidance on how a replacement investor is to acquire an interest during an intervention would provide greater certainty for existing shareholders, creditors and prospective investors.

Conclusion

The KAEDC intervention is more than a decision to remove a board. It is a test of the boundary between regulatory control and corporate ownership. The Electricity Act gives NERC significant powers to intervene in the management of a distressed electricity licensee. However, removing the board does not, by itself, make NERC the owner of KAEDC or extinguish the proprietary interests of its shareholders and creditors.

If the intervention succeeds and KAEDC is returned to a viable position, NERC’s role may remain one of temporary regulatory control. If it does not succeed, section 75(4) of the Electricity Act creates a potential route towards licence revocation and the statutory sale of the undertaking. This is where the balance between regulatory intervention, shareholder ownership and creditor rights becomes most significant.

TAXATION OF VIRTUAL ASSETS IN NIGERIA

/in /by

SEUN TIMI-KOLEOLU & PROMISE ITAH

Introduction

On July 31, 2026, the Nigeria Revenue Service (NRS) issued the Guidelines on the Taxation of Virtual Assets (the “Guidelines”), providing the first comprehensive administrative framework for the taxation of virtual asset transactions in Nigeria.

While the Guidelines do not introduce new taxes, they clarify how existing tax laws apply to virtual assets and establish new compliance obligations for taxpayers, Virtual Asset Service Providers (VASPs) and certain peer-to-peer (P2P) marketplace operators.

This newsletter highlights the key provisions of the Guidelines and their implications for businesses operating within Nigeria’s digital asset ecosystem.

  1. Who and What Are Covered by the Guidelines?

The Guidelines apply to persons and entities who acquire, dispose of, exchange or otherwise deal in virtual assets; receive income or payments in virtual assets; operate as VASPs or P2P marketplace operators; derive taxable income, profits or gains from virtual assets; or provide virtual asset-related services. They cover a broad range of activities, including cryptocurrencies, stablecoins, non-fungible tokens (NFTs), tokenised assets, DeFi transactions, staking, mining, airdrops and token swaps.

  1. What transactions are taxable?

A tax liability generally arises where a virtual asset is disposed of or income is earned from a virtual asset activity. Common taxable transactions include:

  • selling a virtual asset;
  • exchanging one virtual asset for another;
  • receiving staking or mining rewards;
  • earning rewards from DeFi activities;
  • selling NFTs;
  • receiving virtual assets as payment for goods or services; and
  • other transactions that result in taxable income or gains.

Depending on the nature of the transaction, the applicable taxes may include income tax, withholding tax, value added tax (VAT) and stamp duty.

  1. What transactions are not taxable?

The Guidelines clarify that not every transaction involving a virtual asset gives rise to a tax liability. Generally, the following are not treated as taxable events:

  • holding a virtual asset without disposing of it;
  • transferring virtual assets between wallets owned by the same person;
  • locking up virtual assets for staking;
  • creating or minting NFTs;
  • tokenising real-world asset without a change in beneficial ownership; and
  • using virtual assets as collateral for a loan.

The Guidelines also clarify that the transfer of a virtual asset is generally not subject to VAT. Instead, VAT applies to taxable services provided by VASPs, such as exchange, brokerage and transaction facilitation services. In addition, the Guidelines do not apply to the eNaira or other Central Bank Digital Currencies (CBDCs).

  1. How Are Taxable Gains Computed?

The Guidelines introduce a new method for calculating gains from the disposal of virtual assets. Under this method, the purchase price and sale price are first converted into United States Dollars (USD) using the applicable exchange rates on the dates the asset was acquired and sold. The gain is then calculated in USD before being converted back into naira for tax purposes.

This approach is designed to ensure that taxpayers are taxed on their actual investment gains rather than gains arising solely from changes in the exchange rate.

  1. How Will Virtual Asset Taxes Be Collected?

The Guidelines establish a structured framework for collecting taxes on virtual asset transactions, with responsibility shared between taxpayers and intermediaries such as VASPs and P2P marketplace operators. While taxpayers remain responsible for filing their annual tax returns and paying any outstanding tax, these intermediaries are required to deduct and remit certain taxes on behalf of users where applicable. The Guidelines also clarify that income earned from virtual asset activities, such as staking rewards, mining rewards, DeFi yields and virtual assets received as payment for goods or services, is generally taxable when received.

  1. What Does Token-Native Tax Remittance Mean?

The Guidelines introduce a token-native tax remittance framework. Under this framework, withholding tax on qualifying virtual asset disposals and stamp duty are deducted and remitted in the same virtual asset used in the transaction, rather than first being converted into naira.

To support this framework, the NRS intends to establish a Token Treasury, which will initially accept only supported virtual assets from participating registered VASPs. Where a transaction involves an unsupported virtual asset, the Guidelines provide that it will be converted into a supported token without affecting the taxpayer’s withholding tax credit.

  1. How Should Virtual Assets Be Valued?

The Guidelines establish valuation rules to ensure that virtual assets are valued consistently for tax purposes. Where a virtual asset is not directly priced in USD, taxpayers must use approved valuation sources to determine its fair market value and retain records to support their tax calculations. The Guidelines also prescribe how the cost of a virtual asset should be determined depending on how it was acquired, whether through a purchase, token swap, staking or mining rewards, a hard fork (where a blockchain splits and creates new tokens), or an airdrop (where free tokens are distributed by a project).

Where a taxpayer holds multiple units of the same virtual asset acquired at different times or prices, the Guidelines require a consistent method for determining the cost of the units disposed of. The default method is First-In, First-Out (FIFO), which assumes that the earliest acquired units are sold first, or the Weighted Average Cost method, which uses the average cost of all units held to calculate gains or losses. Once a method is adopted, it must be applied consistently.

Taxpayers may offset virtual asset gains and losses within the same tax year, but losses can only be applied against virtual asset gains and cannot be used to reduce other income.

  1. What Are the Key Compliance Requirements and Penalties?

The Guidelines impose extensive compliance obligations on taxpayers, VASPs and certain P2P marketplace operators. Among other things, taxpayers engaging in virtual asset activities must register for tax purposes and obtain a Tax Identification Number (TIN), while VASPs are required to verify users’ TINs, maintain prescribed records, file statutory returns and comply with the reporting requirements under the Nigeria Tax Administration Act (NTAA).

Failure to comply with these obligations may result in significant penalties including administrative penalties imposed by the NRS.

Key Takeaways for Businesses

The Guidelines provide greater certainty on the taxation of virtual assets but also introduce significant compliance obligations. Businesses should therefore:

  • review how their virtual asset transactions are treated under the Guidelines;
  • ensure their accounting and tax systems can support the new valuation and reporting requirements;
  • maintain comprehensive transaction, valuation and exchange-rate records;
  • review arrangements with VASPs and other intermediaries to understand how tax compliance obligations will be managed; and
  • monitor further guidance from the NRS as the new framework is implemented.

Conclusion

The Guidelines mark a significant step in the development of Nigeria’s virtual asset tax framework by providing much-needed clarity on the taxation of digital asset transactions and the compliance obligations of taxpayers and intermediaries. While this newsletter highlights some of the key provisions of the Guidelines, it is not intended to be an exhaustive analysis of the framework.

Businesses involved in virtual asset activities should review their systems, governance and compliance processes to ensure they are prepared to meet the new reporting, withholding and record-keeping requirements and seek appropriate advice where necessary.