Where the Concrete Stops: Navigating Termination and Force Majeure in Nigerian Infrastructure Projects

Introduction

Infrastructure is considered a driving force of industrialisation, as the availability of infrastructural facilities determines the nature of industrial development.1 The need to bridge Nigeria’s infrastructure gap has led to the adoption of various models, such as the Public-Private Partnership (PPP), in which government projects, usually financed by the government, are now completed with private funding.2 Exit provisions covering termination and force majeure have become critical triggers in infrastructure contracts. Termination clauses allow either party to terminate a contract if the other party fails to meet their obligations. Conversely, force majeure provisions are designed to address performance barriers beyond a party’s control, offering relief through suspension or extension of time rather than immediate termination.

In light of the above, this article critically examines these clauses and how they shape risk allocation, dispute resolution, investor exit routes, and the adaptation of infrastructure projects to Nigeria’s industrial landscape.

By the Numbers · Nigeria's Infrastructure Landscape

$878 30 $100 bn bn %

Projected infrastructure Total infrastructure stock Current financing gap deficit by 2040 as share of GDP across the federation

The gap between ambition and concrete is where contracts are tested —and where well-drafted exit provisions earn their keep.

Beyond Default: Project Risk, Exit Provisions & Cost Implications

Standard provisions in public procurement While it may seem that terminating a frameworks allow the procuring entity to contract affords the non-defaulting party a terminate a contract where the contractor form of redress regarding enforcement, it fails to deliver goods or services on time or carries significant financial implications for otherwise breaches material contractual both the terminating and defaulting obligations.3 parties, resulting in costs rather than mitigation.5 This explains the operation of Nigeria’s infrastructure industry is clouded exit provisions, which determine how by risks beyond a contractor’s control, financial exposure is allocated among such as supply chain disruptions or permit project stakeholders when a project enters issuance delays.4 These risks can an exit phase, including potential exposure compromise timelines and budgets, to arbitration or litigation costs. sometimes making strict enforcement of default provisions both impractical and Preventive measures, therefore, require commercially unsustainable. early risk identification, proper project assessments, and the incorporation of robust clauses that define specific events, impacts, protections, and procedures to mitigate them.

Three Pillars of Preventive Contract Design

01 02 03

Early Risk Identification Project Assessments Robust Clauses

Government Policy Shifts and Change of Law

Within the PPP infrastructure landscape, another type of clause in which many infrastructure contracts expressly include are the change-of-law or “Material Adverse Government Action (MAGA)” clauses. A government bulletin on Nigerian PPPs, for instance, lists “change in law”, “exchange rate fluctuation”, and “material adverse government action” as events justifying contract review.6

In PPP concession agreements, a prolonged force majeure event or a material policy shift can even be defined as a trigger for termination or renegotiation.7 Even if a contract does not include a force majeure clause or include government actions as a force majeure event in the contract, Nigerian courts may still find that governmental interference, especially if unforeseeable and outside the parties’ control, entitles the contractor to relief.8

The Nigerian Courts have also stated that a contract will be frustrated where an intervening event makes performance impossible or fundamentally different from what the parties contemplated.9

This means that an anticipated law change during the project will not void the deal unless the contract did not account for it, and performance truly becomes untenable.

MAGA Triggers · Recognised Contract-Review Events

i. ii. iii.

Change in Law Exchange-Rate Material Adverse Fluctuation Government Action Statutory or regulatory change after financial close that alters Material movement of the Naira project economics. against the project's reference currency.

A contract will be frustrated where an intervening event makes performance impossible — or fundamentally different from what the parties contemplated.

Nigerian Judicial Position

Supply-Chain Disruptions & Inflation

Recent years have seen acute supply chain In fact, Nigeria’s Public Procurement crises, cost spikes, and inflation that strain framework explicitly encourages price-infrastructure contracts. In Nigeria’s real adjustment provisions in long-term projects, estate and construction sectors, for requiring special conditions to address example, daily surges in material prices, escalation (labor, materials, equipment) and Naira devaluation, and rising input costs inflation indices.14 have caused chronic delays and significant cost overruns.

The devaluation of the Naira Absent such clauses, courts may allow and rising input costs (cement, steel, labour) renegotiation under general principles of pushed up construction costs”.10 fairness if strict enforcement would cause unjust hardship.15 These market shocks are a reality for project stakeholders, but ordinary The doctrine of rebussicstantibus (things economic hardship is not force majeure by standing thus) is recognised in Nigerian law default.11 to permit contract rebalancing when unforeseeable conditions fundamentally Nigerian courts have consistently held that change the deal,16 even though its direct foreseeable business risks, even steep invocation is rare.

Importantly, under inflation or disrupted supply, do not excuse Nigerian case law precedent, neither performance under a generic force majeure frustration nor force majeure will rescue a clause, unless the clause explicitly covers party who simply finds performance more them.12 expensive or burdensome.17

Contractors feeling the pinch of inflation or delays must instead seek relief through price-adjustment clauses or equitable doctrines. Standard practice is to build price escalation formulas into long-term contracts (indexing costs to inflation or currency rates).13

Cost Shock · Selected Nigerian Inputs, 2023 – 2024

2.2 2.0 +130 × × % Cement: ₦4,000 → ₦8,800 per bag Iron rods: ₦800k → ₦1.6m per ton Aggregate building materials, 2024

Step-In Rights: The Realities for Lenders and Guarantors

Obligations Assumed Guarantor Interaction

Step-in rights constitute a contractual In infrastructure projects where project mechanism through which a lender, upon sponsors provide performance guarantees, specified triggered events, "steps into" the step-in rights interact significantly with shoes of the project company, acquiring the guarantor liability. A guarantor's obligation is right to manage, control, and direct the typically triggered upon the principal debtor's contractor's performance.18 This mechanism is default.

However, the exercise of step-in rights particularly prevalent in limited-recourse by lenders can either mitigate or exacerbate project finance structures, where lenders' guarantor exposure, depending on the security interests are primarily confined to guaranteed structure and how they exercise project assets and revenues rather than the those rights.21 borrower's general assets. Upon activation, lenders typically have a defined exercise Nigerian law recognises that a guarantor's period (commonly thirty to sixty days) to liability is not suspended merely because the decide whether to assume control. This notice creditor exercises remedies or assumes period serves multiple functions: it allows control of performance.

However, a guarantor contractors the opportunity to cure defaults, may be discharged or have its liability reduced permits lenders to conduct due diligence on if the creditor's actions materially prejudice the project status, and provides project sponsors guarantor's position or increase the guarantor's time to arrange alternative financing or exposure.22 contractor replacement if lenders choose not to step in.19

A critical consideration for lenders is the scope of obligations assumed upon the exercise of step-in rights. While step-in rights provide control over project performance, they simultaneously expose lenders to substantial operational and financial liabilities. Upon stepping in, lenders assume the project company’s contractual obligations to contractors, including duties to make timely payment for work performed, to furnish site access and information, and to cooperate in project execution. Consequently, lenders must carefully evaluate whether the benefits of step-in rights justify the assumption of such substantial operational and financial liabilities.20

Exercise Window 30-60 The standard window during which lenders decide whether to assume control. It serves three concurrent functions: cure for contractors, due diligence for lenders, and substitution planning for sponsors. Day notice period

The Termination Playbook: Notice Requirements, Negotiation Strategies, Dispute Avoidance, And Preservation Of Project Value

Unlike termination in ordinary commercial contracts, termination of infrastructure projects involves complex interactions among multiple parties, intricate financing structures, and substantial sunk cost which must be executed with precision to preserve project value, minimise dispute escalation, and protect stakeholder interests. This section provides a comprehensive framework for navigating the termination process in Nigerian infrastructure projects.

Notice Requirements & Procedural Compliance

Proper notice is essential for lawful termination. The notice must clearly state the breach or triggering event, reference the relevant contractual provisions, specify any cure period, and indicate the effective termination date. It must also be delivered according to the method agreed in the contract. The length of the notice and cure period is generally governed by the contract. I. Although, they usually range from 7 to 30 days depending on the nature of the default. Failure to allow the defaulting party an opportunity to remedy the breach may invalidate the termination, and if significant steps are taken to cure the default within the cure period, a court may consider the termination premature and award damages to the affected party.24

Cure Period Window

Day 7 Cure Day 30

Termination effected without honouring the cure period exposes the terminating party to a finding of premature termination—and consequent liability in damages to the counterparty.

Negotiation Strategies & Settlement Approaches

In cases of contractor default, the project Depending on the nature of the dispute, sponsor and contractor should first engage in expert determination. may also be good-faith and amicable discussions to appropriate, particularly for technical issues identify the root cause of the default, assess relating to construction standards, project whether it can be remedied and whether specifications, delay analyses, or valuation continuing the project is commercially disputes. Expert determination is generally feasible. If the default results from temporary faster and more specialised than formal challenges, the sponsor may offer relief, such proceedings, although parties may have as extended payment terms or revised limited rights to challenge an expert's timelines, in exchange for stronger decision.

Dispute Adjudication Boards (DABs) performance guarantees, helping to avoid the or Dispute Avoidance/Adjudication Boards high costs of replacing the contractor. Where (DAABs), commonly found in FIDIC-based amicable discussions do not yield a contracts, may provide interim satisfactory resolution, parties may consider determinations that help maintain project various alternative dispute resolution (ADR) momentum while disputes are being mechanisms. Negotiation remains the most resolved. flexible option, allowing parties to retain control over the outcome and preserve Where ADR mechanisms fail or are commercial relationships, although it may be contractually exhausted, parties may proceed ineffective where positions have become to arbitration or litigation in accordance with entrenched.

If negotiations fail, parties may the dispute resolution provisions of the turn to mediation or expert determination, as contract. Given the complexity and many infrastructure contracts require commercial significance of infrastructure mediation before arbitration or litigation. projects, parties should carefully consider the Mediation is often preferred because it is most appropriate dispute resolution pathway, confidential, faster, less costly, and allows for balancing considerations of cost, speed, flexible solutions beyond strict contractual confidentiality, enforceability, and the need to remedies.25 Its principal limitation is that the preserve ongoing commercial relationships. outcome is non-binding unless incorporated into a settlement agreement.

Preservation of Project Value During Termination

When an infrastructure project is terminated, stakeholders should aim to preserve as much of the project's value as possible and minimise financial losses. This involves assessing the work already completed, materials purchased, and equipment mobilised. Such an assessment helps determine termination costs and identify resources that can still be used. In many Nigerian infrastructure projects, materials and equipment obtained by the original contractor can be used by a replacement contractor, helping to reduce overall project costs.26

Conclusion

In conclusion, effectively managing termination and force majeure in Nigerian infrastructure projects requires a strong understanding of the legal framework, proper compliance with termination procedures, and strategic negotiation. By utilising mechanisms such as step-in rights and pursuing negotiated settlements, project stakeholders can protect their interests, preserve project value, and minimise disputes when faced with contractor default or unexpected events.

Endnotes 12

1. Ikechukwu Duugwu, Musa Mohammed and Dorathy L. Baba ‘Towards Effective Infrastructure Development in Nigeria: Theoretical Considerations from a Project Management Perspective’ American Journal of Industrial and Business Management (2015) [5] 173 https://www.scirp.org/pdf/AJIBM_2015041415563438.pdf Accessed on February 12, 2026. 2. Abdulwahab Isa, Tackling Infrastructure Gap via Public Private Partnership’ <https://www.icrc.gov.ng/tackling-infrastructure-gap-via-public-private-partnership/#:~:text=PPP%20allows%20large%2Dscale%20government%20projects%2C,be%20completed%20with% 20private%20funding.> Accessed on February 12, 2026. 3. John Sebastain, Bill Reidinger and Brian Padove, ‘Navigating Default & Termination: A Contractor’s Guide’ <Navigating Default & Termination: A Contractor’s Guide - Articles - CFMA> Accessed February 12, 2026.

4. Ziyadul Hassan Ishaq, ‘Impact of Risk Factors on Construction Projects’ Completion Cost in Nigeria’ LAUTECH journal of Civil and Environmental Studies (2025) 6[6]. 5. Hooman, Sadeh, Claudio Mirarchi and Alberto Pavan, ‘An Integrated approach for construction risk management: Cost implications’ Journal of Construction Engineering and Management (2021) 2. 6. ICRC, PPP Contract Review (Renegotiation, Extension, Renewal & Termination) and PPP Regulationshttps://www.icrc.gov.ng/wp-content/uploads/2021/08/Q2-2021-Bulletin-Final.pdf# accessed February 13, 2026 7. Ibid 8.

Omonigho Oyoma Brown, (Africa Construction Law), "When Government Policy Shifts: Can Nigerian Contractors Justify Contract Price Adjustments Without a ‘Change in Law’ Clause?" https://africaconstructionlaw.org/when-government-policy-shifts-can-nigerian-contractors-justify-contract-price-adjustments-without-a-change-in-law-clause/# accessed February 13, 2026 9. PWC, Managing contractual obligations post COVID-19 https://www.pwc.com/ng/en/assets/pdf/managing-contractual-obligations-post-covid-19.pdf# accessed February 13, 2026 10. Ibid 11. Planning for the Unpredictable: Understanding Force Majeure under Nigerian Law, (Business Day, August 14, 2025) https://businessday.ng/news/legal-business/article/planning-for-the-unpredictable-understanding-force-majeure-under-nigerian-law/ accessed February 13, 2026 12.

Force Majeure Clauses and Their Legal Effect Under Nigerian Law, https://abe-lp.com/2026/01/29/force-majeure-clauses-and-their-legal-effect-under-nigerian-law/# accessed February 13, 2026 13. Omonigho Oyoma Brown, (Africa Construction Law), "When Government Policy Shifts: Can Nigerian Contractors Justify Contract Price Adjustments Without a ‘Change in Law’ Clause?" https://africaconstructionlaw.org/when-government-policy-shifts-can-nigerian-contractors-justify-contract-price-adjustments-without-a-change-in-law-clause/# accessed February 13, 2026 14. Ibid 15. Ibid 16. Ibid 17. Planning for the Unpredictable: Understanding Force Majeure under Nigerian Law, https://businessday.ng/news/legal-business/article/planning-for-the-unpredictable-understanding-force-majeure-under-nigerian-law/ naccessed 13 February 2026 18.

CIOB: “ Step-in rights in construction contracts” (2020) available at https://www.designingbuildings.co.uk/wiki/Step-in_rights_in_construction_contracts (accessed February 27, 2026) 19. Australian Government Department of Finance “Step -in Rights” available at https://www.finance.gov.au/government/procurement/clausebank/step-rights accessed February 27, 2026 20. 21. Thomson Reuters Practical Law “Rights of guarantors” available at https://uk.practicallaw.thomsonreuters.com/w- 010-6772?transitionType=Default&contextData=(sc. Default)&firstPage=true accessed February 27, 2026 22. Ibid 23. Umpsa “Contract Termination in the Construction Industry” (2025) available at https://journal.ump.edu.my/construction/article/view/11746 accessed March 2, 2026 24.

Paul Ivanoff, Ethan McCarthy “Contract Termination: Considerations in Terminating for Default or for Convenience” Journal of the Canadian College of Construction Lawyers (2021) 25. Peter J Doyle “Project Finance: Issues for Project Sponsors and Project Contract Counterparties” available at https://www7.austlii.edu.au/au/journals/AUMPLawAYbk/2003/8.pdf accessed on March 2, 2026 26. Project Management Institute “Project termination” available at https://www.pmi.org/learning/library/project-termination-delay-1931 accessed on March 2, 2026