Giving That Lasts: Designing A Charitable Trust For Enduring Impact In Nigeria

Introduction

In 2017, a discovery in Nigeria's North-East unsettled the country: relief materials meant for families displaced by conflict had allegedly been diverted and were turning up for sale in open markets.¹ It was a blunt reminder that generosity, on its own, guarantees nothing. Comparable concerns — that charitable platforms can be exploited for illicit financing, including terrorist financing — have surfaced both in Nigeria and across the world.²

Such episodes are the exception, not the rule. Nigeria's charitable landscape is powered by one of the most generous giving cultures anywhere, sustaining education, healthcare, emergency relief, poverty reduction, community development, and religious and cultural life. But the exceptions make one point impossible to ignore: good intentions are not a governance structure. Where charitable vehicles are poorly designed, loosely governed, or lightly supervised, they can lose credibility, drift from their purpose, or be captured for private gain.

This is where charitable trust earns its place. A charitable trust lets a donor dedicate assets to a public purpose, appoint trustees to steward them, and fix clear rules for how the vehicle operates over time. Designed well, it protects charitable assets, sharpens accountability, supports continuity across generations, reduces disputes, and helps ensure that resources actually reach the public benefit they were meant for.

This article outlines the key legal and governance considerations for designing a charitable trust in Nigeria, including purpose, trustee selection, incorporation, tax compliance, reporting obligations, and safeguards against abuse.

What Makes a Trust “Charitable”?

A charitable trust is a legal arrangement through which a donor dedicates property to a purpose that the law recognises as charitable. Unlike a private trust, which usually benefits named individuals or a defined group of beneficiaries, a charitable trust exists to serve the public or a sufficient section of it.³

This distinction matters. A trust does not become charitable simply because the donor intends to do good. Its purpose must fall within a category recognised by law and must provide a genuine public benefit, a principle across common law jurisdictions. The traditional classification comes from the English decision in the Pemsel’s case, which grouped charitable trusts into four broad categories:⁴

1. relief of poverty;
2. advancement of education;
3. advancement of religion; and
4. other purposes beneficial to the

Nigerian courts have drawn from this common law approach in determining whether a trust is charitable. The key test is public benefit. The trust must serve the public, or a sufficient section of it, and not merely advance the private interests of a family, closed group, or selected individuals. In Fatumola v Ogundimu, the court reinforced this distinction by recognising that a charitable purpose must have a public character.⁵

For donors, trustees, families, companies, and foundations, the purpose clause is therefore one of the most important parts of the trust instrument. A vague intention to “help people” may create uncertainty, while a clause limited to relatives, employees, members of a closed association, or persons chosen entirely at the trustees’ discretion may raise legal concerns.

As with other trusts, a charitable trust should also satisfy the three certainties: the donor must clearly intend to create a binding trust; the assets dedicated to the trust must be identifiable; and the charitable purpose must be clear enough for the trustees to administer and for the court or relevant authority to supervise. A charitable trust does not need named beneficiaries because it is created for a public purpose. Where necessary, the Attorney-General may act to protect the public interest and enforce the trust. This makes charitable trusts useful for long-term philanthropy, but the flexibility must be supported by precision. A well-drafted trust instrument should clearly state the charitable purpose, identify the assets committed to the trust, define the trustees’ powers, and include governance safeguards that keep the trust aligned with its charitable objective.

Why Incorporation is a Design Decision, Not Paperwork

A charitable trust should not only reflect the donor’s intentions; it should also be able to survive changes in trusteeship, leadership, funding, and regulatory expectations. Incorporation is therefore a critical step in building a charitable vehicle that is credible, sustainable, and fit for long-term impact.

An unincorporated charitable trust may be created by deed or recognised under common law principles, but it has practical limitations. It does not have a separate legal personality, so assets may have to be held in the names of individual trustees. This can create avoidable risks where a trustee dies, resigns, becomes insolvent, acts improperly, or becomes involved in a personal dispute. It may also complicate property ownership, banking, contracting, succession, and donor engagement.

Incorporation addresses these risks. Under the Companies and Allied Matters Act, 2020, charitable and not-for-profit bodies may be registered as incorporated trustees. Once registered, the organisation gains legal personality, perpetual succession, and a recognised governance structure. It can own property, open and operate bank accounts, enter contracts, receive grants, sue and be sued in its registered name, and continue to exist despite changes in its trustees or founders.

For donors and philanthropic institutions, incorporation also improves credibility. It gives the charitable vehicle a formal identity, places it within the supervisory framework of the Corporate Affairs Commission, and supports compliance with annual returns, governance obligations, tax requirements, anti-money laundering expectations, and other applicable regulatory duties.

This matters because modern philanthropy depends on trust. Donors, development partners, corporate sponsors, regulators, and beneficiaries increasingly expect charitable organisations to show that funds are properly received, applied, recorded, and reported. Past concerns about diversion of humanitarian support and misuse of charitable platforms for illicit financing show why structure and oversight are not mere formalities. They protect the charitable purpose, the trustees, the donors, and the communities the trust is meant to serve.

Incorporation should therefore be treated as a core design feature, not an administrative afterthought. A properly incorporated charitable trust is better positioned to attract funding, hold assets securely, maintain continuity, comply with regulatory obligations, and deliver measurable public benefit over time.

Choosing Your Vehicle: Incorporated Trustees or Company Limited by Guarantee

Once the decision to incorporate has been made, the next question is which legal structure best supports the charitable objective. Under the Companies and Allied Matters Act, 2020, a charitable or not-for-profit vehicle may generally be structured as Incorporated Trustees or as a Company Limited by Guarantee. Both structures can support charitable work, but they serve different needs.

• Incorporated Trustees: This is the more common structure for religious bodies, foundations, NGOs, community associations, and charitable This structure gives the organisation legal personality, perpetual succession, and capacity to hold property, enter contracts, operate bank accounts, and continue despite changes in trustees. It is usually suitable for small and medium-sized charities, community-based projects, religious

organisations, and foundations focused on receiving donations, holding assets, and carrying out charitable programmes.⁶

• Company Limited by Guarantee (LTD/GTE): A LTD/GTE is a more formal corporate structure for not-for-profit work. It has no shareholders; instead, members undertake to contribute a stated amount if the company is wound up, and any income or surplus must be applied towards its objects. This route may suit larger charities, universities, research institutions, policy organisations, professional bodies, and NGOs that need stronger governance or significant institutional funding. It may also give funders greater comfort because it uses a familiar corporate structure with members, directors, formal decision-making processes, and statutory reporting However, it involves a more demanding incorporation process, including the requirement for the consent of the Attorney-General of the Federation.

There is no single best structure for every charitable trust. The appropriate route depends on the purpose, scale, funding model, governance needs, assets involved, and long-term plans of the organisation. Founders should therefore choose deliberately: the structure should support the charitable purpose, meet regulatory expectations, and inspire confidence among donors, regulators, and beneficiaries.

Tax: A Privilege You Have to Keep

Tax is a key design issue for any charitable trust. Donors and trustees should not assume that charitable status automatically exempts all income or assets from tax. Nigerian tax law supports genuine charitable activity, but the exemption is conditional. It depends on the organisation’s purpose, the source of its income, the use of its assets, and whether its activities have a public character.

The Nigeria Tax Act, 2025 (NTA)⁷ preserves the exemption for persons engaged in educational, religious, or charitable activities of a public character. In practical terms, donations, grants, endowments, and income applied directly to the charitable purpose may qualify for exemption. However, profits or gains from trade or business may fall outside the exemption and become taxable. Where a charitable trust is set up by a company, donations made from the company to the charitable trust constitutes allowable deductions in computing Company Income Tax provided that the donations do not exceed 10% of the company’s profit before tax in the relevant tax year.⁸

The same principle applies to assets held in trust for charitable or religious institutions of a public character. Gains from such assets may be exempt where the assets were not acquired in connection with trade or business and the proceeds are applied solely for charitable purposes.⁹ Where property stops being used for the charitable purpose, tax consequences may arise.¹⁰

For both Incorporated Trustees and Companies Limited by Guarantee, the practical lesson is the same: exemption should be treated as a compliance position to be maintained, not a blanket privilege. The main difference is operational. Incorporated Trustees are often simpler vehicles for charitable work, while Companies Limited by Guarantee may have greater flexibility to undertake activities connected to their objects. In either case, income from unrelated commercial ventures may be taxable, even if the surplus is later applied to charitable purposes.

A well-designed charitable trust should therefore build tax compliance into its governance framework from the start. Trustees should keep proper books of account, separate charitable funds from commercial income, document expenditure, file returns on time, and seek tax advice where the organisation holds significant assets, earns investment income, operates donor-funded projects, or carries on revenue-generating activities. This protects the organisation’s exemption, strengthens donor confidence, and reduces regulatory risk.

Challenges and Recommendations

Charitable trusts can support long-term social impact in Nigeria, but they must respond to practical realities. Many donors still prefer informal giving through family, religious, or community channels. While valuable, informal giving may not provide continuity, accountability, or measurable impact. Compliance costs can also discourage smaller charities, while weak governance may expose trusts to mismanagement or loss of donor confidence.

These challenges show why proper design matters. A charitable trust should be simple enough to operate, but strong enough to protect its purpose, assets, trustees, donors, and beneficiaries. To strengthen charitable trusts in Nigeria:

1. Promote structured philanthropy: Encourage donors to use charitable trusts for long-term giving, not only informal or one-off donations.
2. Simplify compliance: Make registration and filing easier for genuine charities, especially smaller and community-based organisations.
3. Improve tax incentives: Provide clear and accessible tax reliefs for individuals, companies, and philanthropic institutions.
4. Strengthen governance: Include clear objects, trustee powers, financial controls, conflict-of-interest rules, and reporting obligations.
5. Use technology: Adopt digital payment systems, beneficiary records, and project reporting tools to improve transparency.
6. Enforce trustee duties: Hold trustees accountable for mismanagement, diversion, or personal benefit.

Conclusion

Designing a charitable trust in Nigeria requires more than goodwill. Donors, families, companies, and philanthropic institutions should begin with a clear charitable purpose, choose the right legal structure, appoint responsible trustees, and build governance, tax, reporting, and accountability systems from the outset.

When properly structured, a charitable trust can preserve assets, attract donor confidence, reduce regulatory risk, and deliver public benefit long after the founder’s initial gift. The key lesson is simple: a charitable trust should not only be created to give; it should be designed to endure.

Footnotes

^{1 Punch Newspaper, ‘’ Theft of Food Aid for Terror Victims Shameful.’’ (2th June 2017) ( https://punchng.com/theft-of-food-aid-for-terror-victims-shameful/) accessed 20th September 2021}

^{2 Samuel Okunade and Olusola Ogunnubi, ‘’ Humanitarian Crisis in North-Eastern Nigeria: Responses and Sustainable Solutions.’’ ( https://repository.up.ac.za/server/api/core/bitstreams/8387c952-6f26-4879-824e-a1250134281a/content) accessed 20th September 2021.}

^{3 See Adeniji v. Adeniji (1972) 1 All NLR (Pt. 1) 298}

^{4 Commissioners for Special Purposes of Income Tax v Pemsel (1891) AC 531.}

^{5 Fatumola v Ogundimu (2003) 10 NWLR (Pt 828) 485 (CA).}

^{6 Section 823-850 CAMA 2020}

^{7 Section 162(1)(iii) Nigeria Tax Act 2025}

^{8 Section 163(5), NTA 2025}

^{9 Section 55(1) NTA 2025}

^{10 Section 55(2) NTA 2025}

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.