Commercial Lawyers Nigeria 2026: Contract & Tax Risks for Energy & Infrastructure Deals

Nigeria’s consolidated tax legislation, led by the Nigeria Tax Act (NTA) and the Nigeria Tax Administration Act (NTAA), both effective 1 January 2026, has fundamentally altered the economics of energy and infrastructure transactions across the country. For in-house counsel, CFOs, project sponsors and lenders, the immediate challenge is not simply understanding the new rates and rules but re-drafting live contracts to allocate the resulting tax and price risk correctly. This practitioner guide, written for commercial lawyers Nigeria teams and the deal professionals they advise, provides clause-level drafting templates, a role-based risk-allocation matrix and a negotiation playbook tailored to the post-2026 landscape.

Whether you are negotiating an EPC contract for a gas-fired power plant, structuring project finance for a toll-road concession, or advising an international lender on withholding covenants, the guidance below translates legislative change into transactional action.

Executive Summary, What In-House Teams Must Do Now

Every energy and infrastructure contract signed before 1 January 2026 should be audited against three immediate priorities. Failure to act exposes parties to unallocated tax costs, pricing disputes and, in the worst case, contract termination claims.

• Action 1, Review all tax indemnity and tax representation clauses. The NTA restructures corporate income tax obligations and introduces revised administrative procedures under the NTAA. Existing indemnities drafted by reference to the repealed Companies Income Tax Act (CITA) or the Federal Inland Revenue Service (Establishment) Act may no longer cover the taxes they were designed to address. Identify every indemnity, warranty and representation that references legacy legislation and flag it for redrafting.
• Action 2, Stress-test price-adjustment mechanisms. Revised VAT rules and corporate tax 2026 Nigeria changes shift the tax burden between counterparties. Run a sensitivity analysis on your contract price model to quantify the impact of rate changes and expanded tax bases on project revenues, EPC costs and O&M budgets.
• Action 3, Audit change-in-law and termination language. Many legacy contracts define “change in law” narrowly. If the NTA and NTAA are not captured by the existing definition, a party suffering increased costs may have no contractual remedy. Check whether the definition extends to subordinate legislation and Nigeria Revenue Service (NRS) administrative guidance.

Industry observers expect that contracts failing to address these three areas within the first half of 2026 will generate a wave of renegotiation requests, and, inevitably, disputes.

Quick Legislative Summary and Timeline, Nigeria Tax Reform 2026

The 2026 reform package consolidated and replaced several legacy statutes. The table below summarises the core Acts, their effective dates and the practical impact most relevant to commercial lawyers Nigeria practitioners advising on energy and infrastructure deals.

The full text of the NTA is published on the Nigeria Revenue Service website. The National Assembly Legislative Task Force (NALTF) has also published an explanatory briefing on key changes and their policy intent. KPMG Nigeria’s January 2026 analysis identified several gaps, errors and omissions in the new Acts, a document that should be on every drafter’s desk because it highlights precisely the areas where contractual ambiguity is most likely to generate disputes.

How the 2026 Tax Changes Shift Deal Economics for Energy and Infrastructure

Understanding the fiscal impact is a prerequisite to drafting effective clauses. The nigeria tax reform 2026 package affects deal economics at three levels: project finance models, EPC and O&M pricing, and offtake or concession revenue.

Impact on project finance models

Revised corporate tax structures alter the after-tax cash flow available for debt service. Lenders modelling debt-service coverage ratios (DSCRs) and loan-life coverage ratios (LLCRs) must recalibrate base-case and downside scenarios. Where the NTA changes the timing or quantum of tax deductions, for example, modified capital allowance schedules, the effect on cash flow can be material even if headline rates appear broadly similar. For a deeper look at upstream impacts, see our guide on investment opportunities in Nigeria’s petroleum industry.

Impact on EPC and O&M pricing

Energy project contracts Nigeria typically include lump-sum or unit-rate pricing with limited tax pass-through. Where VAT treatment changes, for example, a supply previously zero-rated or exempt becoming taxable, the contractor faces a cost increase that may not be recoverable under the existing price mechanism. O&M contracts with annual escalation formulae tied to CPI alone will not capture a discrete tax-law change.

Example numeric sensitivity

Practical negotiation tip: Before entering price negotiations, both parties should commission an independent tax impact assessment under the NTA and share the results in a common data room. This reduces information asymmetry and accelerates agreement on which party bears incremental tax costs.

Who Should Bear New Tax Liabilities? Role-Based Risk Allocation Matrix

Allocating tax risk is a commercial negotiation, not a legal default. The matrix below recommends a starting position for each counterparty, reflecting market practice in Nigerian energy and infrastructure transactions and the specific risks introduced by the 2026 Acts.

The objectives of local content requirements for companies with foreign ownership in Nigeria add a further overlay: sponsors with local-content obligations must ensure that tax-risk allocation does not inadvertently conflict with Nigerian Content Development and Monitoring Board (NCDMB) requirements.

Tax Indemnities, Gross-Up and Tax Representation Drafting, Clause Playbook for Commercial Lawyers Nigeria

This section provides model clause language for the three most critical tax-risk provisions in post-2026 energy and infrastructure contracts. Each model is annotated with drafting commentary.

Tax indemnity clause, model and commentary

A tax indemnity clause nigeria-compliant wording should cover taxes imposed or increased by the NTA that were not reflected in the contract price as at the date of signing. The following model is suitable for an EPC or O&M context:

“The Employer shall indemnify and hold harmless the Contractor against any Tax Liability (as defined) arising under the Nigeria Tax Act 2025 or any subordinate legislation, regulation or binding guidance issued by the Nigeria Revenue Service thereunder, to the extent that such Tax Liability: (a) was not in force or reasonably foreseeable as at the Base Date; and (b) results in an increase in the Contractor’s cost of performing the Works that is not otherwise recoverable under this Contract. The Contractor shall notify the Employer of any such Tax Liability within [30] Business Days of becoming aware of it and shall provide reasonable supporting documentation.”

• Commentary: Define “Tax Liability” broadly to include corporate income tax, VAT, WHT and any levy or charge created by the NTA. Tie the trigger to the “Base Date” (usually the date of the financial model or commercial close) rather than the signing date, so that the indemnity captures changes enacted between signing and financial close.
• Survival: Specify that the indemnity survives completion and final payment for a period aligned with the NRS assessment limitation period under the NTAA.
• Cap: Employers will seek a monetary cap. A common market position is to cap the tax indemnity at a percentage of the contract price (often 5–10%), with a separate uncapped indemnity for fraud or wilful non-compliance.

Gross-up vs indemnity, when to use each, with model clause

A tax gross-up clause operates mechanically: if a payment is subject to deduction or withholding, the payer increases the payment so that the recipient receives the net amount originally intended. An indemnity, by contrast, compensates for a loss after the event. In practice, cross-border tax risk Nigeria transactions require both.

“If the Borrower is required by law to make any deduction or withholding from any payment due to the Lender under this Agreement on account of Tax, the Borrower shall increase the payment to the Lender to the extent necessary to ensure that, after the making of such deduction or withholding (including any deduction or withholding on account of Tax applicable to any additional amounts payable under this clause), the Lender receives and retains a net amount equal to the full amount it would have received had no such deduction or withholding been required.”

• When to use gross-up: WHT on interest, dividends, fees and royalties payable to non-residents, the most common application in project finance facilities and shareholder loans.
• When to use indemnity: Broader corporate tax exposures, retrospective assessments, penalties and any tax that cannot be addressed by increasing a single payment.

Tax representation and warranty wording

Tax representations in share-purchase agreements, concession agreements and joint-venture documents should be updated to reference the NTA and NTAA. A minimum set of representations includes:

• Compliance representation: “The Company has filed all tax returns and paid all taxes due under Applicable Law, including the Nigeria Tax Act 2025 and the Nigeria Tax Administration Act 2025.”
• No pending assessment: “There is no outstanding assessment, audit or investigation by the Nigeria Revenue Service in respect of the Company.”
• Adequate provision: “The Company’s financial statements contain adequate provision for all tax liabilities, including deferred tax liabilities arising under the NTA.”

Templars Law’s practitioner analysis confirms that legacy references to the FIRS or CITA in existing representations should be replaced by NRS and NTA references to avoid enforceability gaps.

Price Adjustment, Change-in-Law and Termination, Drafting and Triggers

When tax changes are large enough to alter the economic bargain, counterparties need contractual mechanisms to adjust price, share the cost, or, in extreme cases, exit the contract. This section addresses the three primary drafting tools.

Contract price adjustment clause, model

A contract price adjustment clause should be formulaic and verifiable, not discretionary. The model below ties adjustment to a demonstrable incremental tax cost under the NTA:

“If, after the Base Date, any Change in Tax Law results in an Incremental Tax Cost to the Contractor exceeding [NGN amount or percentage of Contract Price] in any Contract Year, the Contract Price shall be adjusted upward by the amount of the Incremental Tax Cost, subject to: (a) the Contractor providing a detailed calculation certified by an independent tax adviser; (b) the Employer’s right to audit the calculation within [60] days; and (c) any dispute being referred to Expert Determination in accordance with Clause [X].”

• Define “Change in Tax Law”: Include the NTA, NTAA, NRS binding rulings, regulations and any amendment thereto. Exclude general changes in accounting standards unless they trigger a tax liability.
• Materiality threshold: Avoid micro-adjustments by setting a de minimis threshold, typically 0.5–1% of annual contract value.

Change-in-law clause, model and interplay with tax indemnity

A well-drafted change-in-law clause captures the nigeria tax reform 2026 package explicitly. The clause should interact with, not duplicate, the tax indemnity. Industry observers expect that the most effective approach is a “waterfall” structure: the change-in-law clause triggers the right to claim, and the tax indemnity quantifies the compensation.

“‘Change in Law’ means the enactment, amendment, repeal or reinterpretation of any law, statute, regulation, order or binding guidance (including the Nigeria Tax Act 2025, the Nigeria Tax Administration Act 2025 and any regulation or ruling issued by the Nigeria Revenue Service) occurring after the Base Date.”

For the full regulatory lifecycle that frames these definitions, see our analysis of regulatory compliance in Nigeria’s oil and gas lifecycle.

Termination drafting pitfalls and arbitration carve-outs

Termination for change in law should be a remedy of last resort. Best practice is to require a mandatory negotiation period (typically 90–180 days) before termination can be triggered. The clause should specify:

• The quantum of incremental cost that qualifies as “material adverse” (a defined percentage of project revenues or a fixed amount).
• That termination is only available if price adjustment fails to restore economic equilibrium after good-faith negotiation.
• Payment of termination compensation (typically outstanding debt plus equity return to a defined IRR) to the affected party.
• That disputes about whether the threshold has been met are referred to arbitration, not to the ordinary courts, preserving enforceability and neutrality.

Cross-Border Tax and Withholding Risks for Foreign Investors and Lenders

Foreign investors, international contractors and offshore lenders face specific cross-border tax risk Nigeria exposures under the NTA and NTAA. The table below provides a checklist of the key withholding and repatriation issues to address in transactional documents.

Withholding and repatriation checklist

PwC Nigeria’s tax summaries provide regularly updated rate tables and treaty analysis that should be consulted when drafting withholding gross-up mechanics. For broader context on structuring international commercial transactions, refer to our dedicated guide.

Dispute Avoidance and Dispute Resolution Drafting

Tax-related contract disputes are among the most technically complex and commercially disruptive. Effective dispute resolution clauses can contain costs and preserve commercial relationships. The following drafting strategies reflect established practice for energy project contracts Nigeria:

• Tiered escalation. Require senior management negotiation (14–30 days), followed by optional mediation, before arbitration. This gives commercial teams a structured opportunity to resolve pricing disputes without triggering formal proceedings.
• Expert determination for tax quantum. Where the dispute concerns the calculation of an incremental tax cost or the operation of a gross-up formula, refer the quantum question to an independent tax expert (typically a Big 4 firm or senior tax practitioner agreed by both parties). The expert’s determination should be final and binding on quantum, while legal questions (e.g., interpretation of the NTA) remain subject to arbitration.
• Arbitration seat and rules. Lagos remains the default seat for domestic energy disputes, with the Lagos Court of Arbitration (LCA) rules increasingly adopted. For international transactions, London (LCIA) or Paris (ICC) remain common. Specify that the arbitral tribunal has jurisdiction to grant interim relief, including orders to maintain payments pending determination of tax-adjustment claims.
• Enforceability. Nigeria is a signatory to the New York Convention. Ensure the arbitration clause is self-contained and does not inadvertently create parallel jurisdiction in the Nigerian courts for tax-related claims.

Practical Negotiation Checklist and Redline Priorities

The following redline priorities are organised by counterparty role. Use them as a negotiation sequencing guide during contract review sessions.

For project sponsors

• Redline any fixed-price clause that does not include a tax-variation mechanism referencing the NTA.
• Ensure the concession or offtake agreement includes a change-in-law definition broad enough to capture NRS administrative guidance.
• Confirm that the project company’s tax representations in shareholder agreements are updated to reference the NTA and NTAA.

For lenders and DFIs

• Update the tax covenant in the facility agreement to require borrower compliance with the NTA and NTAA, not legacy statutes.
• Insist on a borrower obligation to notify the lender of any NRS audit, assessment or ruling within a defined period.
• Confirm that the WHT gross-up clause covers all payments under all finance documents, not just the facility agreement.

For EPC contractors and O&M providers

• Seek a broad tax indemnity with survival beyond practical completion.
• Resist any clause that allocates “all taxes” to the contractor without a price-adjustment mechanism.
• Include a right to suspend works if a tax-related price adjustment claim exceeds a defined threshold and remains unresolved for more than 90 days.

Conclusion

The nigeria tax reform 2026 package is the most significant overhaul of Nigeria’s fiscal framework in decades, and its impact on energy and infrastructure transactions is immediate and pervasive. Commercial lawyers Nigeria practitioners and in-house teams must treat contract redlining as an urgent priority, not a future work-stream. The three core actions remain: audit and update every tax indemnity and representation to reference the NTA and NTAA; stress-test pricing under the new fiscal regime; and ensure that change-in-law and termination clauses are broad enough to capture both the Acts and NRS subordinate guidance.

The model clauses and risk-allocation framework in this guide provide a starting point for negotiation, but every transaction has its own commercial dynamics. Engage experienced commercial counsel early, before positions harden, to secure clause wording that protects your interests and withstands scrutiny. For further guidance, explore our directory of commercial lawyers specialising in Nigerian energy and infrastructure transactions.

Sources

1. Nigeria Revenue Service, Nigeria Tax Act 2025 (PDF)
2. Nigeria Revenue Service, Official Website
3. National Assembly Legislative Task Force, Understanding the New Tax Law: Key Changes and Implications
4. PwC Nigeria, Tax Summaries: Significant Developments
5. KPMG Nigeria, Inherent Errors, Gaps and Omissions in New Tax Acts (January 2026)
6. Templars Law, Understanding the New Nigerian Tax Regime: Key Changes and Impact
7. Legal 500, Nigeria: Commercial, Corporate and M&A