In March 2020, the Federal Competition and Consumer Protection Commission (the Commission), the Nigerian competition authority, published for consultation the draft Merger Review Regulations (the Regulations) and the draft Merger Review Guidelines (the Guidelines). While these documents, once adopted, will form the core of the Nigerian merger control regime, they not only fail to provide comprehensive answers to existing questions but also raise new concerns on the scope of the regime. Further reconsideration of these aspects is needed in order to provide merging parties with the necessary certainty.
One of the existing questions relate to the possible extra-territoriality of the Nigerian merger control regime, which arises from the thresholds adopted by the Commission in September 2019. In accordance with the thresholds, transactions are notifiable if the parties have combined turnover of NGN 1bn (approx. USD 2.7m) or more in Nigeria (combined leg) or if the target has turnover of NGN 500m (approx. USD 1.3m) or more in Nigeria (target leg). The lack of a requirement for target presence in the combined leg means that it could be triggered by a transaction involving an acquirer (whether local or international) with relatively small Nigerian operations even if the target has no presence in Nigeria.
The Regulations or the Guidelines do not unambiguously address the question of extra-territoriality as they do not spell out what is a foreign merger with a ‘local component’. In some instances, these documents imply that only acquisitions of Nigerian businesses that meet the thresholds themselves are notifiable, whereas elsewhere they mention that a foreign acquirer must have Nigerian subsidiaries. The Guidelines add further confusion by stating that the acquisitions of ‘property’ (assumed to be real estate) by Nigerian corporates or individuals is notifiable irrespective of where the property is located.
Aside from failing to clarify the territorial scope of the Nigerian merger control regime, the Regulations and the Guidelines raise new material concerns. In the context of the acquisition of minority shareholdings, the Commission has proposed a long list of considerations that constitute material influence and thus control for the purposes of the Nigerian merger control regime. As an illustration only, the list includes an ability to block any special resolution (irrespective of subject matter), any pre-emption rights in relation to the sale of shares or assets and the rights and influence of any significant debt holders. The list of considerations is far more extensive than international best practice (such as under the EU Merger Regulation) and will lead to a wide range of transactions being notifiable to the Commission.
The Regulations and Guidelines, if adopted in their current form, have failed to address key aspects of the Nigerian merger control regime. It is critical that the questions on territorial scope of the regime are addressed in order to provide the necessary certainty to merging parties. In addition, the extensive regulation of minority shareholdings will lead to a wide range of non-controlling stakes having to be notified to the Commission. It is notable that the consultation of the documents have not included the draft merger filing forms and proposed filing fees, important elements that will also need to be reviewed in due course to determine the proportionality of information/documentary requirements as well as the cost of filings.