Nigeria's Insolvency Framework Fails to Adapt to Modern Business Reality

Nigeria's insolvency framework has undergone significant reforms with the enactment of the Companies and Allied Matters Act 2020 (CAMA 2020). However, the regime remains largely untested and insufficiently adapted to Nigeria's evolving business environment. The article argues that a second-generation reform agenda is needed to address the demands of contemporary commerce.

The current framework is still largely focused on liquidation, with corporate rescue procedures introduced by CAMA 2020 being underutilized. Company Voluntary Arrangements (CVAs) and Administration are rare, and liquidation remains cumbersome and slow. The regime also lacks provisions for the treatment of digital assets, pre-pack arrangements, cross-border cooperation, and informal business structures.

Nigeria's economy is heavily driven by micro, small, and medium-sized enterprises (MSMEs), which operate largely outside the formal insolvency framework. Many MSMEs face difficulties in accessing corporate rescue procedures due to high professional costs, with debts below ₦50 million being a significant barrier. The result is disorderly business closure, job losses, and non-payment of suppliers.

The article proposes five pillars for a second-generation reform agenda: an effective corporate rescue culture supported by functional moratoriums; a simplified and low-cost insolvency framework for MSMEs; statutory recognition and treatment of digital and intangible assets; the adoption of a comprehensive cross-border insolvency framework; and institutional strengthening through specialized courts and an independent regulatory body.