Investors shun Nigeria over contract breaches, court delays, ex-parte orders
Legal and business leaders warn that Nigeria's inconsistent contract enforcement, prolonged commercial disputes, and questionable ex parte court orders are deterring long-term investors, who prioritize asset safety over mere profit potential.
Intelligence analysis by Gemini 2.5 Flash
A recent summit in Lagos highlighted how Nigeria's judicial inefficiencies, including delayed commercial dispute resolution and the misuse of ex parte court orders, coupled with inconsistent government policies, significantly erode investor confidence. Experts emphasized that capital seeks safety, and the current legal environment makes it difficult for investors to protect assets and…
Imagine you have a lemonade stand, and someone promises to buy all your lemonade but then doesn't pay, or a judge makes a quick rule without hearing your side, stopping you from selling. Big investors are like grown-ups who want to build big factories in Nigeria, but they worry that if promises are broken or judges make unfair quick decisions, their money might get stuck or disappear. They want to be sure their money is safe, like putting it in a strong piggy bank, before they build anything.
Analysis
Charles Adeyemi Candide-Johnson, SAN, succinctly articulated the core issue, stating that "capital goes where it is safe," not merely where profit is promised. This perspective underscores a fundamental principle of international investment, suggesting that while Nigeria may offer lucrative opportunities, the perceived risk to capital due to an unreliable legal system outweighs potential gains for many. His remarks set the tone for the broader discussion, emphasizing the need for a predictable and secure environment.
His insight highlights that investors are not solely driven by the prospect of high returns but are equally, if not more, concerned with the ability to protect their assets and ensure the enforceability of their agreements. This focus on safety implies that improvements in judicial efficiency and policy consistency are paramount to attracting and retaining significant long-term capital. Without this foundational security, Nigeria struggles to compete effectively for global investment.
Seplat Energy
The case involving Seplat Energy serves as a stark illustration of how judicial processes can be exploited to disrupt corporate governance and operations. Three shareholders, holding a minuscule 0.002 percent of the company's shares, managed to obtain ex parte orders that temporarily restrained the CEO, executive management, and board members. This incident, though quickly overturned by the Court of Appeal, demonstrated the vulnerability of even major corporations to potentially frivolous legal actions.
Such occurrences send a chilling message to potential investors about the stability and predictability of the business environment. The ease with which such disruptive orders can be obtained, even if later discharged, introduces significant operational risk and uncertainty. It highlights a critical flaw in the judicial system that allows for temporary but impactful interference in legitimate business activities, thereby eroding confidence in the overall investment climate.
N71bn Damages
The commercial dispute cited by Bode Olanipekun, SAN, culminating in a High Court award of over N71bn in damages, vividly demonstrates the financial and temporal costs of prolonged litigation and judicial inconsistencies. This case, spanning nearly a decade from 2015 to 2023, involved a company obtaining ex parte orders after a similar application was initially refused by another judge, leading to a protracted legal battle that reached the Supreme Court. The eventual damages award, while significant, does not fully address the decade-long disruption and uncertainty faced by Company B.
The lingering question of Company B's status "10 years after" without recovering its losses underscores the severe impact on businesses. This scenario exemplifies the "return off investment" concern, where capital is not just failing to grow but is actively lost or tied up indefinitely due to judicial delays and abuses. It reinforces the argument for alternative dispute resolution mechanisms, which promise quicker, more specialized, and less disruptive resolutions, thereby safeguarding investor capital and operational continuity.
Key points
- Investors are shunning Nigeria due to inconsistent contract enforcement and prolonged commercial disputes.
- The misuse of ex parte court orders and unpredictable government policies are significant deterrents.
- Legal and business leaders emphasize that capital prioritizes safety over mere profit potential.
- The American Business Council Nigeria warns regulatory inconsistencies could force companies to leave.
- Alternative Dispute Resolution (ADR) mechanisms are proposed as a more efficient solution for commercial disputes.
If Nigeria's judiciary implements reforms to ensure consistent contract enforcement, reduce court delays, and curb the misuse of ex parte orders, investor confidence could significantly improve. This would attract more long-term capital, fostering economic growth and job creation as businesses feel more secure in their investments.
Should the current issues of contract breaches, judicial delays, and questionable ex parte orders persist, Nigeria risks a continued decline in foreign direct investment. This could lead to existing companies reconsidering their operations or exiting the market, further hindering economic development and potentially increasing unemployment.
