Mergers and acquisitions in Nigeria’s oil and gas sector have become significantly more costly and complex, driven by a web of regulatory requirements. This is particularly evident in share‐deal transactions where a target holds both upstream and mid/downstream assets and in deals that meet prescribed thresholds to trigger merger control review by the competition authorities. Together, these requirements impose large fees (often a percentage of deal value), and detailed filings. Recent regulations in particular have introduced large assignment fees and overlapping licensing requirements, on top of traditional taxes and lender demands, driving up the total cost of acquisitions.

Complex Regulatory Web and Fees

Under Nigeria’s 2021 Petroleum Industry Act (PIA), any sale or pledge of oil and gas interests requires regulatory consent. In the upstream sector, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) must review and recommend any assignment or change of control, with the final approval of the Minster of Petroleum Resources. At the same time, transfers of pipelines, gas plants, refineries or other midstream/downstream assets fall under the purview of the Nigerian Midstream & Downstream Petroleum Regulatory Authority (NMDPRA), which likewise is required to approve license transfers. In addition, all deals meeting prescribed thresholds trigger merger control review by the Federal Competition and Consumer Protection Commission (FCCPC), and listed or public‐company deals also need SEC and stock‐exchange clearances. In practice, this fragmented structure means a single integrated deal can trigger parallel approvals from multiple agencies with compounding fees and documentation requirements.

Adding to the burden, the NUPRC introduced the Assignment of Interest Regulations, 2024 (issued pursuant to the PIA) to formally establish a 2% processing fee plus a 5% premium on the value of each upstream transaction, a combined 7% of the value of the transaction in order to receive the consent of the Minister of Petroleum Resources to the transaction. Even intra-group transfers are no longer free; they attract at least the processing fee. On top of this, buyers may face NMDPRA fees when transferring midstream licenses (often percentage fees as well). For a big integrated oil and gas merger, the FCCPC element can easily add thousands of Dollars to the budget. There are also standard taxes like stamp duty, capital gains tax on any gains, etc., which may become applicable.

Financing Structures and Security Interests

Most large oil and gas deals are leveraged, with acquisition financing secured against the target’s key assets, including license interests and project revenues. This adds another layer of costs and regulatory complexity. Section 95(5) of the PIA and the Assignment of Interest Regulations allow licence holders to create security interests over their licenses and leases, but only with the NUPRC’s prior consent.

In practice, this means that where acquisition financing is involved, the purchaser must apply separately to NUPRC for approval of the security arrangement (and pay any related fees). This layered consent process effectively ties lenders into the regulatory machinery, slowing down funding and potentially requiring replacement or waiver of securities if consent is withheld or delayed. It can also trigger additional fees, as each registered charge may carry its own processing fee. In deals involving midstream and/or downstream assets, similar security constraints apply under NMDPRA. All these are in addition to the typical perfection costs that apply to financing deals like stamp duties, corporate and land registry registration fees, etc.

The effect is that acquisition financing in Nigeria often incurs a chain of regulatory consents – consent to the sale itself, and then separate consents for each security interest created in connection with the financing. Each consent process typically attracts fees (and in some cases, bank guarantees). As such, lenders factor these compliance burdens into their risk assessment and which are then ultimately built into the cost of capital, thereby raising the overall cost of borrowing for the acquisition.

A $1 Billion Deal Scenario
To illustrate the cumulative impact of regulatory costs in Nigerian oil and gas transactions, consider a hypothetical $1 billion share acquisition of a company with upstream and mid/downstream assets. Based on prevailing regulatory frameworks and fee structures, the financial burden before completion can be substantial. Some of the applicable fees include:

• NUPRC Assignment Fee: Under the 2024 Assignment of Interest Regulations, a combined 7% (2% processing fee + 5% premium) applies to upstream interest transfers. This amounts to $70 million in fees.
• FCCPC Notification Fee: The FCCPC charges 0.45% on the first ₦500 million, 0.40% on the next ₦500 million, 0.35% on the remaining amount.
• SEC/NGX Filing Fees: If the target is a publicly listed entity, additional costs apply. The SEC may charge 0.2% – 0.3% of the share value, adding $2 – $3 million. The NGX also imposes filing and disclosure-related charges, which may run into hundreds of thousands of dollars, depending on transaction structure.
• Security Perfection Costs: If the acquisition is financed (as most are), lenders typically require security over shares, receivables, cashflows, and fixed assets. The perfection of such security interests in Nigeria triggers multiple costs, including:
  • Stamp Duty: 0.375% of secured amount;
  • CAC Registration of Charges: 0.35% of secured amount; and
  • NUPRC Consent Fee: estimated at 1% of the secured amount, depending on asset complexity and regulatory discretion.
• Legal and Consultancy Fees: Compliance with NUPRC, NMDPRA, FCCPC, SEC, companies’ registry and possibly FIRS or state land registries requires coordinated support from lawyers, financial advisors, tax consultants, and technical experts. Professional fees may account for 1% – 2% of deal value.

Taken together, regulatory levies, transaction fees, and delay-related expenses can account for about $100 – $120 million in this scenario, before operational integration starts. This is a material dilution of value that both sellers and buyers must factor into negotiations. Sellers may need to discount expectations to accommodate these costs, while buyers face significant challenges to achieving commercially viable internal rates of return.

Recommendations

To reduce the regulatory burdens currently associated with oil and gas acquisition transactions in Nigeria, several practical reforms could be implemented. A proposal is to harmonize timelines and create a “one-stop shop” portal where multi-agency approvals can be coordinated. For example, synchronizing NUPRC and NMDPRA approvals could prevent parallel regulatory review. In fact, it can be reasonably argued that for acquisition transactions involving solely oil and gas assets, the NUPRC’s process for granting ministerial consent should incorporate relevant competition assessments. This would potentially eliminate the need for separate FCCPC review.

There is also a compelling case for eliminating consent fees on security created specifically in connection with acquisition financing, particularly where the underlying transaction has already received ministerial approval. Imposing additional fees at the security stage creates an unnecessary cost burden, given that the acquisition itself has been vetted and approved. Moreover, since any enforcement of such security would still require a separate consent process and additional fees, the rationale for charging at the point of creation is weak and counterproductive to facilitating investment. Such charges serve only to increase financing costs and discourage much-needed investment in the sector, especially by indigenous companies.

Conclusion

In Nigeria’s petroleum sector, regulatory approvals and costs are integral to deal strategy. From consent to the assignment of interests, to competition filings and financing consents each layer must be managed meticulously. Collectively, these requirements raise the bar for transaction planning and execution. However, by understanding the rules and engaging experts early, companies can mitigate delay and cost. This is why partnering with advisors who understand the landscape can be a decisive advantage.

For personalized support, reach out to CLG Global's team of expert lawyers and business advisors via adeleke.alao@clgglobal.com.