Intercreditor Agreement (Nigeria)

An Intercreditor Agreement in Nigeria records the obligations the parties accept and the terms governing their arrangement.

Intercreditor agreements in Nigeria are governed by the general law of contract under Nigerian common law, the Companies and Allied Matters Act 2020 (CAMA 2020) for corporate borrowers, and the Central Bank of Nigeria (CBN) Prudential Guidelines for Deposit Money Banks and Other Financial Institutions, which regulate the credit risk management practices of CBN-licensed banks. For transactions involving bonds and capital market instruments, the Securities and Exchange Commission (SEC) Nigeria's rules under the Investment and Securities Act 2024 also apply.

The fundamental purpose of an Intercreditor Agreement is to resolve the potential conflicts that arise when multiple creditors hold competing claims against the same borrower and the same pool of assets. Without an Intercreditor Agreement, each creditor would have the right to independently enforce their security — potentially destabilising the borrower's business and destroying value. The agreement creates a structured framework under which: senior creditors are repaid before subordinated creditors; security enforcement requires consent of a specified majority of creditors; and standstill periods prevent individual creditors from accelerating their loans or enforcing security while restructuring negotiations proceed.

In Nigerian project finance — particularly for infrastructure projects financed through the Infrastructure Corporation of Nigeria (InfraCorp), the Federal Government's Sukuk programme, or International Finance Corporation (IFC) loans — Intercreditor Agreements are standard instruments. The Nigeria Mortgage Refinance Company (NMRC) and the Federal Mortgage Bank of Nigeria (FMBN) use intercreditor structures in housing finance transactions. In the oil and gas sector, joint venture credit facilities among IOCs and NNPC Limited routinely require intercreditor arrangements.

An Intercreditor Agreement must be distinguished from a Deed of Priorities (or Deeds of Priority), which is a simpler instrument focused solely on the ranking of registered security interests among creditors, without the broader governance provisions (voting, enforcement coordination, payment waterfalls) of a full Intercreditor Agreement.

The legal framework governing the Intercreditor Agreement (Nigeria) in Nigeria draws on several key statutes and regulatory bodies. Under Nigerian law, the Companies and Allied Matters Act 2020 (CAMA) regulates corporate entities through the Corporate Affairs Commission (CAC). The Labour Act (Cap L1 LFN 2004) and the National Industrial Court of Nigeria (NICN) govern employment disputes. The Nigeria Data Protection Regulation (NDPR) 2019 and the Nigeria Data Protection Commission (NDPC) protect personal data. The Federal Inland Revenue Service (FIRS) administers tax obligations under the Companies Income Tax Act. The Federal High Court and state High Courts have jurisdiction over civil matters. Parties executing a Intercreditor Agreement (Nigeria) in Nigeria should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Contract Law (received English common law) sets the foundational requirements.

An Intercreditor Agreement in Nigeria is required whenever a borrower has or will have multiple creditors whose rights and claims need to be formally ranked and coordinated.

An Intercreditor Agreement is needed when a Nigerian company raises a syndicated loan facility from multiple CBN-licensed commercial banks — for example, a syndicate led by Access Bank Plc, Zenith Bank Plc, and First Bank of Nigeria — where the syndicate members need to agree on the voting thresholds for acceleration, security enforcement, and restructuring decisions under the Loan Market Association (LMA) documentation framework adapted for Nigerian law.

An Intercreditor Agreement is required in project finance transactions for infrastructure assets in Nigeria — such as power plants, toll roads, or gas processing facilities — where senior lenders (typically development finance institutions and commercial banks) and mezzanine or subordinated debt providers need to agree on their respective ranking and enforcement rights over the project assets.

An Intercreditor Agreement is needed when a Nigerian company undergoes a used buyout financed by a combination of senior bank debt and high-yield bonds or subordinated notes, and the senior bank creditors require a formal subordination and standstill agreement from the junior noteholders.

An Intercreditor Agreement is required when a company in financial distress undertakes a debt restructuring under the supervision of the CBN or a court-sanctioned scheme of arrangement under CAMA 2020 Section 715, and the various classes of creditors — secured lenders, trade creditors, bondholders, and inter-company creditors — need a documented framework for their relative entitlements.

An Intercreditor Agreement is needed when two or more creditors hold security interests over the same pool of assets (e.g., a fixed and floating charge debenture over a company's assets), and the Deeds Registry and the CAC need clear documentation of priority for registration purposes under CAMA 2020 Section 214.

Parties in Nigeria should prepare a Intercreditor Agreement (Nigeria) proactively rather than waiting for a dispute to arise. Courts interpret agreements based on the written terms rather than oral representations. Under Nigerian law, the Companies and Allied Matters Act 2020 (CAMA) regulates corporate entities through the Corporate Affairs Commission (CAC). The Labour Act (Cap L1 LFN 2004) and the National Industrial Court of Nigeria (NICN) govern employment disputes. The Nigeria Data Protection Regulation (NDPR) 2019 and the Nigeria Data Protection Commission (NDPC) protect personal data. The Federal Inland Revenue Service (FIRS) administers tax obligations under the Companies Income Tax Act. The Federal High Court and state High Courts have jurisdiction over civil matters. Where the transaction involves regulated activities, prior approval from the relevant authority may be required before execution.

A valid Intercreditor Agreement in Nigeria must contain the following essential elements.

Parties: Full legal names, CAMA 2020 RC numbers issued by the Corporate Affairs Commission (CAC), and addresses of all creditor parties (senior lenders, mezzanine lenders, subordinated creditors), the security agent (if a separate entity holds security for all creditors), and the borrower. The agent bank (facility agent) coordinates payments and communications and is typically a CBN-licensed commercial bank such as Access Bank Plc, Zenith Bank Plc, or First Bank of Nigeria Limited.

Debt Ranking and Waterfall: A clear statement of the ranking of all debt obligations — senior debt (first priority), mezzanine debt (second priority), subordinated debt, and equity — and the payment waterfall specifying the order in which available cash proceeds are applied to service and repay each class of debt. Senior debt is typically constituted under a CBN Prudential Guidelines-compliant facility agreement.

Security Sharing: A description of the security package (debenture, mortgage, pledge, assignment of receivables) and the terms on which security is held by the security agent for the benefit of all secured creditors on a pari passu or priority basis. Under Section 214 of CAMA 2020, charges over company assets must be registered with the CAC within 90 days of creation to be valid against third parties. Mortgages over land require governor's consent under Section 22 of the Land Use Act 1978 and registration at the relevant State Land Registry.

Subordination: The subordinated creditor's undertaking not to receive payment of principal or interest on subordinated debt until all senior debt has been fully repaid (payment subordination), and not to enforce any security or claim against the borrower until senior debt is discharged (lien subordination). Any payment received by a subordinated creditor in breach of this undertaking is held on trust for the senior creditors under the turnover provisions.

Standstill: A standstill period during which creditors agree not to accelerate their loans or enforce security, allowing time for restructuring negotiations. Typically 90–180 days. During the standstill, the borrower must comply with the CBN Prudential Guidelines for Deposit Money Banks on non-performing loan management.

Enforcement Coordination: The voting thresholds required to instruct the security agent to enforce security — typically a specified majority of senior creditors by outstanding loan amount — and the process for distributing enforcement proceeds according to the waterfall. Enforcement of fixed charges requires a court-appointed receiver under Part X of CAMA 2020; floating charges crystallise automatically on certain events.

CAC Charge Registration and Priority: Confirmation that all charges included in the security package are registered at the CAC Companies Charges Register under Section 214 of CAMA 2020. The Intercreditor Agreement must address the priority between registered charges: earlier CAC registration generally takes priority, unless the creditors have expressly agreed otherwise in the Intercreditor Agreement.

Stamp Duty: The Intercreditor Agreement must be stamped under the Stamp Duties Act (Cap S8, LFN 2004). The Federal Inland Revenue Service (FIRS) collects stamp duty on corporate instruments under the Finance Act 2020. An unstamped agreement is inadmissible in evidence before Nigerian courts. For capital market transactions involving listed bonds, the Securities and Exchange Commission (SEC Nigeria) may impose additional registration requirements under the Investment and Securities Act 2024.

Information Rights: The borrower's obligation to provide all creditors with financial information, compliance certificates, and notice of defaults simultaneously. CBN Prudential Guidelines require banks to classify and provision for non-performing loans, which the information rights mechanism supports.

Governing Law and Dispute Resolution: Nigerian law, with the Federal High Court or High Court of the relevant state having jurisdiction. International transactions may specify English law with Nigerian courts having non-exclusive jurisdiction. The Arbitration and Mediation Act 2023 provides for arbitration as an alternative dispute resolution mechanism for cross-border intercreditor disputes.

Forms-legal.com provides this Intercreditor Agreement as a starting point for Nigeria-compliant multi-lender financing documentation. Parties should seek advice from qualified Nigerian banking lawyers and confirm current CBN Prudential Guidelines before execution.