Answer ... Security interests in Nigeria are categorised as follow:
- charge; and
Answer ... Generally, there are no restrictions on who can enforce a security interest over assets in Nigeria, provided that the person seeking enforcement is the secured party or its trustee, agent, assignee, successor or transferee.
Mortgage: Under Nigerian law, in the event of default by the borrower, a mortgage can be enforced if it has been executed and registered in accordance with the Conveyancing Act or the Property and Conveyancing Law of a state or the Mortgage and Property Law of Lagos State. Enforcement of the terms of such mortgage is dependent on whether the power of sale has arisen. This is determined by default, as provided under the relevant agreement.
Pledge: In Nigeria, a property can be pledged only if it is transferable by delivery of possession. Usually, the possession and use of the property are given to the pledgee as guarantee for repayment of the debt, with a view to redeeming the asset upon payment of the debt. Notwithstanding the above, it is possible to create a pledge in respect of shares; and under the Companies and Allied Matters Act, there is no distinction or heading for a pledge - the reference is always to a ‘charge’.
Charge: A charge is usually given by way of debenture over a company’s assets. It may be secured by a fixed charge on some of the company’s property or by a floating charge over all of the company’s property. A charge must be registered with the Corporate Affairs Commission within 90 days of its creation. A floating charge requires a crystallising event (ie, default in payment of any sums due) prior to the enforcement of such security.
In the case of corporate entities, mortgages and charges are given legal effect (priority) when they are registered with the Corporate Affairs Commission.
Generally, the enforcement of security may be hampered by delays in the administration of justice. It is not unusual for cases to run for years, especially where it appears that there are contentious issues to be considered. A failure to perfect security may also complicate or prevent the enforcement of security.