Nigerian law is based on the principles of British common law, as a result of its historical link with the United Kingdom during the colonial era. While Nigeria does not as yet have a specific Insolvency Law on its books, bankruptcy and insolvency issues are treated in the Nigerian Constitution (1999) and the Companies and Allied Matters Act (1990). In 1990, Nigeria did pass a Bankruptcy Act (which deals only with individual bankruptcy), but even that law has been rarely used until recently. According to INSOL International, the Business Recovery and Insolvency Practitioners Association of Nigeria has been working to draft comprehensive legislation with the objective to codify insolvency laws as the Nigerian Insolvency Law. The World Bank Global Insolvency Law Database website reports that, in 2006, a Report on the Observance of Standards and Codes dealing with the issue of insolvency was carried out in Nigeria, but that study is not yet available on the World Bank website or any other publicly available forum. There is, therefore, insufficient publicly available information as to Nigeria's compliance with the Principles and Guidelines for Effective Insolvency and Creditor Rights Systems promulgated by the World Bank.

General Overview

Nigeria's insolvency and bankruptcy related legislation is derived from the principles of British common law. While there is no insolvency law, per se, the winding up of a business is dealt with in the Companies and Allied Matters Act (1990), under Chapter XV, Sections 407 and 532. There is a Bankruptcy Act dealing with individual bankruptcy, which was passed in 1990 and amended in 1992, but according to INSOL International (n.d.), this has been used only rarely until recently. According to INSOL International, the Business Recovery and Insolvency Practitioners Association of Nigeria (BIPRAN) has been working to draft comprehensive legislation with the objective of codifying insolvency laws as the Nigerian Insolvency Law. From September 18 to 29, 2006, the World Bank carried out an assessment of Nigeria's insolvency regime for its Report on the Observance of Standards and Codes program, according to the World Bank's Global Insolvency Law Database website. However, the report has not yet been made available on the World Bank website or any other publicly available forum. Therefore, there is insufficient publicly available information that directly addresses Nigeria's compliance with the Principles and Guidelines for Effective Insolvency and Creditor Rights Systems promulgated by the World Bank.

In an online article originally posted to the This Day Online website in May 2001, Amarachukwu Ona writes that Nigeria's insolvency law has been slow in its development, even though the fact of insolvency is a very common occurrence. Ona asserts that such laws as do exist are not enforced. In an attempt to address this problem, the BRIPAN was constituted in 1994 under the authority of the Companies and Allied Matters Act of 1990 (replacing its predecessor organization, the Insolvency Practitioners Association of Nigeria). The association's members are also members of the worldwide insolvency practitioners' association, INSOL International. According to Ona's article, BRIPAN has taken as its mandate the professionalization and regulation of Nigeria's insolvency practitioners, keeping its members abreast of international developments in the field of insolvency and bankruptcy law and participating in the development of insolvency legislation in the Nigerian National Assembly.

In his article "Judicial Treatment of Insolvency Matters in Nigeria," (n.d.) Nigerian High Court Justice S.D. Bage writes that although insolvency and bankruptcy are very common occurrences in Nigeria, it is rare that cases are brought before the court. According to Justice Bage, a creditor may file an action against a debtor firm, or its principal(s), if the debt owed exceeds 2000 Niara (approximately US$16.00), a demand for payment has been duly filed at the company's head office, and the demand has not been satisfied by payment or payment arrangements within three weeks after such a filing. However, Bage notes that these provisions ignore the reality that most "companies" rarely exist outside of the papers in a principal's briefcase, rendering it nearly impossible to properly file a demand for payment. For this reason, according to Bage, it is rare for a formal insolvency proceeding against a firm to be handled within the court system. With regard to cross-border insolvencies, Nigerian law does recognize foreign judgments if and only if there is a true reciprocity arrangement between Nigeria and the home jurisdiction of the creditor, as provided for in the Foreign Judgments (Reciprocal Enforcements) Act of 1990.

According to the World Bank's 2008 the Doing Business Index, the time and cost required to resolve bankruptcies in Nigeria was 2 years and 22% (of the estate) respectively, compared with a regional average of 3.4 years and 20% and an Organization for Economic Cooperation and Development (OECD) average of 1.3 years and 7.5%. The recovery rate in Nigeria was 27.5, compared with the regional average of 17.1 and OECD average of 74.1. The recovery rate measures the efficiency of foreclosure or bankruptcy procedures, expressed in terms of how many cents on the dollar claimants recover from the insolvent firm.