Do lenders and borrowers amount to merging entities in Nigeria?

The Covid-19 pandemic has led to a reduction in demand for companies’ products and services, a disruption of supply chains, and a tightening of the provision of credit by financial institutions, all of which have worked together to exacerbate corporate debt. In response to these rising debt levels, lenders who have loans that are on the brink of becoming non-performing are typically faced with two options: enforcing their security or undertaking some form of debt restructuring. This includes but but is not limited to: (i) waivers, amendments or renegotiation of financial covenants as set out in existing facility agreements; (ii) refinancing of existing facilities; (iii) an injection of equity; and (iv) debt-to-equity swaps, where the creditor acquires an equity stake in the borrower. In the event that the lender takes a substantial equity position as a result of the debt, the borrower may improve its financial position, but the lender may be exposed to the potential risk of triggering merger control rules.