Sovereign Liability Exposure Under Nigeria's Space Economy Regulations - Key Considerations

The National Space Research and Development Agency Act appears intended to encourage private participation in satellite launches and related commercial space activities. However, beneath this policy objective lies a material sovereign risk that does not appear to be fully addressed within the current regulatory structure. In particular, the decision to cap an operator's insurance and indemnity obligations at USD 15 million under sections 39 and 40 of the Regulation on Licensing and Supervision of Space Activities, 2015, raises questions as to the extent of residual exposure borne by the Federal Government of Nigeria under international space law. We highlight some key considerations below.

1. Residual State Liability as a Matter of International Law

The Federal Government of Nigeria is a party to the Convention on International Liability for Damage Caused by Space Objects, which imposes strict and absolute liability on a "Launching State" for damage caused by its space objects on the surface of the Earth or to aircraft in flight. This liability attaches irrespective of fault and is not limited by the ownership or control structure of the space object. Accordingly, the Federal Government of Nigeria remains internationally responsible for damage arising from space activities carried out by private operators licensed under its domestic framework. Also, any limitation of liability imposed by the Regulation on Licensing and Supervision of Space Activities, 2015 operates solely as a domestic risk-allocation mechanism between the Federal Government of Nigeria and the licensed operator. Such limitations do not, as a matter of international law, constrain the rights of foreign states or international claimants, with the effect that, Nigeria's international liability exposure remains uncapped in the event of a space-related incident.

2. Interpretive Ambiguity in the Insurance and Indemnity Structure

Under the Regulation on Licensing and Supervision of Space Activities, 2015, licensed operators appears subject to two parallel financial obligations. First, an operator must procure a third-party liability insurance policy with a coverage of USD 15 million, intended to respond to third-party claims arising from the operator's space activities. Second, the operator is required to execute a statutory indemnity in favour of the Federal Government of Nigeria, also in the sum of USD 15 million, pursuant to which the operator undertakes to reimburse the Federal Government of Nigeria for liabilities it incurs. The relationship between these two obligations is not expressly clarified by the Regulation on Licensing and Supervision of Space Activities, 2015 and is therefore capable of more than one interpretation. On one interpretation, the insurance requirement and the statutory indemnity may be viewed as distinct and cumulative protections. Under this construction, the indemnity would operate as an additional, balance-sheet obligation of the operator, potentially providing a second layer of financial recourse to the Federal Government of Nigeria beyond insurance proceeds.

On an alternative interpretation, the two obligations may be regarded as co-extensive rather than cumulative. On this view, the indemnity functions primarily as a back-to-back mechanism intended to be satisfied through the insurance policy, with both obligations subject to the same USD 15 million ceiling. The indemnity would therefore not constitute an additional risk layer but rather a domestic allocation of responsibility for the same tranche of liability.

The Regulation on Licensing and Supervision of Space Activities, 2015 do not conclusively resolve this ambiguity. However, in the absence of express language requiring the indemnity to operate independently of insurance coverage or to respond above insured limits, the practical effect may be that the Federal Government of Nigeria's total recoverable amount from the operator, whether through insurance proceeds or indemnification,is effectively capped at USD 15 million. From a risk-management perspective, this uncertainty is itself material, as interpretive ambiguity in financial protection regimes often crystallises in favour of narrower recovery in stress scenarios.

3. The Indemnity Gap and Fiscal Risk

Perhaps the most immediate concern arising from the current framework is the disparity between the USD 15 million indemnity cap and the scale of losses that may realistically arise from modern space operations. The potential third-party damage associated with satellite collisions, debris-generating events, or uncontrolled re-entries may easily exceed several hundred million dollars. Where total losses exceed the indemnity threshold, the excess liability necessarily falls on the Federal Government of Nigeria. This creates an unfunded contingent obligation that could crystallise following a single high-impact incident. From a fiscal perspective, the Federal Government of Nigeria effectively assumes catastrophic tail risk without collecting a commensurate premium or establishing a dedicated reserve. Additionally, at USD 15 million, Nigeria's liability limitation threshold is materially lower than those imposed by established space-faring states.

4. Absence of Mission-Sensitive Risk Assessment

The Regulation on Licensing and Supervision of Space Activities, appear to apply a uniform indemnity threshold across all licensed activities, without differentiation based on orbital altitude, mission duration, satellite mass, or end-of-life disposal profile. This approach treats low-risk and high-risk missions as economically equivalent, despite materially different exposure profiles. By contrast, leading space jurisdictions adopt risk-based licensing models that calibrate insurance and indemnity requirements to the Maximum Probable Loss associated with each mission. In the absence of a comparable framework, The Federal Government of Nigeria may inadvertently incentivise higher-risk operations while transferring the associated downside to the public balance sheet and, by extension, the Nigerian taxpayer.

5. Solvency and Enforcement Limitations

Even within the confines of the USD 15 million cap, recovery may be contingent on the continued financial viability of the licensed operator and the enforceability of its insurance coverage. In practice, insurers may decline claims due to technical breaches, operational deviations, or exclusions embedded in complex space insurance policies. In such cases, the Federal Government of Nigeria remains exposed internationally while facing limited or no practical recovery against a financially distressed or judgment-proof operator. This dynamic further amplifies sovereign exposure and weakens the effectiveness of the indemnity regime as a risk-mitigation tool.

Key Takeaways

It may be prudent to consider a more resilient regulatory framework that aligns private risk assumption more closely with Nigeria's international exposure. This could include the adoption of tiered insurance and indemnity requirements linked to mission-specific risk assessments, enhanced financial security mechanisms capable of surviving operator insolvency, and the establishment of a dedicated reserve or pooling mechanism to address residual sovereign liability.

Absent such measures, the existing indemnity structure risks functioning less as a safeguard for the Federal Government of Nigeria and more as an implicit subsidy for commercial operators, with potentially significant consequences for public finances in the event of a major space-related incident.

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