Description
ABSTRACT
Priorities in Security Interests and Project Finance in Nigeria: An Appraisal
Adefolake Olachi Adewusi*
Project finance is a method of funding in which the lender looks primarily to the revenue streams and other assets of a borrower – typically a special purpose vehicle (SPV), both as the source of repayment and as security for the debt. Before operations commence, the lenders usually have some limited recourse to the sponsors of the borrower by way of guarantees, indemnities and comfort letters, to minimise losses in the event of failure of the project. Interests in project finance are made up of real and personal security, comprising a network of mortgages, charges, liens, assignments, guarantees, indemnities and comfort letters. The priority given to security interests is relevant in determining whether it can be regarded as being reliable in liquidating indebtedness where there are competing lenders’ claims. It is therefore useful to appraise the relationship between interests used in project finance in Nigeria and the principle of priority. This paper using the doctrinal approach, appraises the framework governing priority of these interests in project finance, finds that sustenance of the interests in project finance requires additional intervention and suggests amongst others, the development of a legal framework and the use of a one-stop shop for security registrations as part of the ways in which identified impediments to priority of security interests used in project finance may be addressed.
Keywords: Project finance, security interest, debt, security registration
* LLM, MCIArb, ACIS, ACTI. Doctoral Researcher, University of Lagos and Senior Associate, ǼLEX.
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