Arbitration vs. Litigation in Nigeria: How to Choose the Right Forum for Your Commercial Dispute

Dispute Resolution Practice Group

Introduction

When a commercial dispute arises in Nigeria, one of the first and most consequential decisions a business must make is “where do we resolve this?” The answer is not always obvious and getting it wrong choosing a forum that is too slow, too public, too expensive, or simply inappropriate for the nature of the dispute can be as damaging as the dispute itself.

This article examines the two primary forums for commercial dispute resolution in Nigeria; arbitration and litigation, against the backdrop of Nigeria’s significantly modernised arbitration framework under the Arbitration and Mediation Act 2023, and provides a framework for businesses to make the right choice for their commercial circumstances.

I. The Legal Landscape: The AMA 2023 and the Court System

Nigeria’s arbitration framework was fundamentally modernised by the Arbitration and Mediation Act 2023 (AMA 2023), which received Presidential assent on 26 May 2023 and repealed the Arbitration and Conciliation Act Cap A18 LFN 2004.[1] The AMA 2023 is based on the 2006 amendments to the UNCITRAL Model Law on International Commercial Arbitration, aligning Nigeria’s arbitration framework with the leading global standard. It governs both domestic and international commercial arbitration, introduces a comprehensive mediation framework, and domesticates the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

Litigation, by contrast, is conducted within Nigeria’s constitutional court system[2] principally the Federal High Court (for disputes involving federal agencies, admiralty, banking, and certain other matters), the State High Courts (for general commercial litigation), and for employment matters, the National Industrial Court. Court proceedings are public, governed by established procedural rules, and subject to a multi-tier appellate process that runs from the High Court through the Court of Appeal to the Supreme Court.

II. Arbitration: The Case for It and the Circumstances Where It Works Best

A. Speed

The most significant practical advantage of arbitration over litigation in Nigeria is speed. The Nigerian court system carries a well-documented backlog of commercial cases: a first-instance judgment in a complex commercial dispute at the Federal High Court or in a State High Court can take between three and seven years, with the appellate process adding substantially more time.[3] A commercial arbitration conducted under institutional rules such as those of the Lagos Court of Arbitration (LCA) or an international institution can typically conclude within 12 to 18 months from the commencement of proceedings.

B. Confidentiality

Arbitration proceedings are private.[4] Court proceedings in Nigeria are conducted in public, and court records are generally accessible. For businesses involved in disputes concerning pricing arrangements, sensitive commercial terms, proprietary technical information, or reputational matters, the confidentiality of arbitration is not a marginal benefit, it is often the decisive factor in forum selection.

C. Specialist Expertise

Commercial arbitrations allow the parties to select arbitrators with specific expertise in the relevant field; construction engineering, banking and finance, oil and gas, information technology. Nigerian courts, while staffed by experienced judges, are generalist courts applying general procedural rules to disputes that may require deep technical understanding. Arbitrator selection gives parties significantly greater control over the quality and relevance of the decision-making.

D. Enforceability: Domestic and International

Arbitral awards under the AMA 2023 are recognised as binding and enforceable by Nigerian courts, subject only to the narrow grounds for refusal set out in section 58 of the Act.[5] More significantly, through the domestication of the New York Convention in the Second Schedule of the AMA 2023, awards made in any of the 172 contracting states to the Convention including the United Kingdom, the United States, France, Singapore, and the UAE are directly enforceable in Nigeria.[6] Reciprocally, Nigerian awards are enforceable in those states. For businesses involved in cross-border transactions, this is a material advantage that litigation cannot replicate.

E. Procedural Flexibility

The AMA 2023 allows the parties to agree on the procedure to be followed by the tribunal, including the rules of evidence, the hearing format, and the timeline.[7] This flexibility allows a bespoke, efficient process calibrated to the specific dispute, rather than the one-size-fits-all procedural rules that govern court proceedings.

F. Interim Measures

The AMA 2023 significantly strengthens the enforcement of interim measures ordered by an arbitral tribunal. Under section 28, a party may enforce an interim measure ordered by a tribunal in the same manner as an arbitral award, and the court is prohibited from reviewing the merits of the measure.[8] This is a marked improvement over the previous position and makes arbitration a more effective forum for urgent relief.

For most complex Nigerian commercial disputes — particularly those involving significant sums, sensitive information, technical expertise, or cross-border elements — arbitration is the structurally superior forum under Nigerian law as it now stands.

III. Litigation: When the Courts Are the Right Forum

Arbitration is not universally superior. There are circumstances in which litigation before a Nigerian court is the appropriate or necessary forum:

Disputes involving public law rights or constitutional questions cannot be arbitrated. Where a business disputes a regulatory decision by a government agency, challenges the constitutionality of legislation, or seeks judicial review of administrative action, only the courts have jurisdiction.
Disputes involving third parties who are not signatories to the arbitration agreement cannot be consolidated into arbitration without those parties’ consent. Where a dispute involves multiple parties on different contractual footing as in construction chain disputes, litigation may be the only forum that can adjudicate all claims in a single proceeding.
Where a party requires urgent injunctive relief — for example, to freeze assets, restrain a transaction, or compel action pending determination of the merits — the court’s contempt jurisdiction and enforcement powers may be more immediately effective than a tribunal’s interim measures, particularly where the counterparty is uncooperative.
Precedent and public vindication: where a business seeks not merely a financial remedy but a publicly binding judicial determination of a legal issue, or where the public vindication of its rights is commercially important, the public nature of court proceedings is an advantage rather than a liability.
Matters that fall within the exclusive jurisdiction of specific courts cannot be arbitrated: labour disputes before the NICN, admiralty matters before the Federal High Court, and certain regulatory enforcement matters are examples.

IV. Mediation: The Often-Overlooked Third Option

The AMA 2023 introduced for the first time a comprehensive statutory framework for mediation in Nigeria, governing both domestic and international mediation and incorporating the Singapore Convention on Mediation.[9] Mediation is a non-binding, voluntary process in which a neutral mediator facilitates negotiation between the parties with the goal of reaching a settlement. It is typically faster and less expensive than both arbitration and litigation, and critically, it preserves the commercial relationship between the parties.

For disputes between parties who have an ongoing commercial relationship; supplier and customer, joint venture partners, franchisor and franchisee etc, mediation should almost always be the first step. A well-designed dispute resolution clause will provide for mediation first, followed by arbitration if mediation fails. This tiered approach is increasingly standard in sophisticated Nigerian commercial contracts.

Conclusion: Choose Before the Dispute Arises

The worst time to think about forum selection is after a dispute has arisen and positions have hardened. The choice of dispute resolution mechanism is a contract drafting decision, one that should be made with the specific commercial relationship, transaction value, industry, and counterparty in mind.

At Enebeli & Partners LLP, our Dispute Resolution practice advises on the drafting of effective dispute resolution clauses, the conduct of commercial arbitrations before Nigerian and international institutions, litigation before the Federal and State High Courts, and the enforcement of arbitral awards in Nigeria. We also act as advocates in arbitration proceedings and assist clients in navigating the interplay between arbitral and court jurisdiction under the AMA 2023.

If your commercial contracts do not contain a clearly drafted, institution-specific dispute resolution clause, that gap is a liability. Contact us to review and strengthen your dispute resolution framework before your next dispute tests it.

About Enebeli & Partners LLP

Enebeli & Partners LLP is a full-service Nigerian law firm with offices in Lagos, advising businesses, investors, and institutions across all sectors of the Nigerian economy. The firm’s practice spans Corporate Commercial, Dispute Resolution, Banking & Finance, Capital Markets, Taxation, FinTech & Digital Assets, Data Protection, Real Estate, Labour & Employment, and Regulatory Compliance.

To instruct the firm or to request a consultation, contact us at info@goenebeli.com or call +234 802 255 7029

[1]Arbitration and Mediation Act 2023 (AMA 2023), assented to on 26 May 2023, repealing the Arbitration and Conciliation Act Cap A18 LFN 2004. The AMA 2023 is based on the 2006 amendments to the UNCITRAL Model Law on International Commercial Arbitration and provides a unified legal framework for both domestic and international arbitration and mediation in Nigeria. Section 91(1) of the AMA 2023 defines arbitration as commercial arbitration, whether or not administered by a permanent arbitral institution.

[2]Constitution of the Federal Republic of Nigeria 1999 (as amended), s. 6: judicial power is vested in the courts established by the Constitution and state laws. The Federal High Court, State High Courts, and the Court of Appeal have jurisdiction over commercial disputes depending on the parties and subject matter. The National Industrial Court has exclusive jurisdiction over labour and employment matters (s. 254C). See also: Administration of Criminal Justice Act 2015 for the federal court framework and the various state Administration of Criminal Justice Laws for state courts.

[3]The Nigerian court system’s capacity challenges are well-documented. A commercial case in the Federal High Court or a State High Court in Lagos may take between three and seven years from commencement to judgment at first instance, with the appellate process adding further years. The Supreme Court of Nigeria has a backlog of cases stretching over several years. This systemic delay is the primary driver of the growth in commercial arbitration in Nigeria. See: Alliance Law Firm, ‘A Review of the AMA 2023: Charting a New Course in Nigeria’ (2024).

[4]The confidentiality of arbitration proceedings is recognised under the AMA 2023 and the institutional rules of Nigerian arbitral institutions. Unlike court proceedings, which are conducted in public and whose records are generally accessible, arbitration proceedings and awards remain private unless the parties agree otherwise or disclosure is required by law or for enforcement purposes. This is a significant advantage for commercial disputes involving sensitive business information, pricing data, or trade secrets.

[5]AMA 2023, an arbitral award shall be recognised as binding and, upon application in writing to the court, shall be enforced subject only to the limited grounds for refusal set out in s. 58 (domestic awards) and the Second Schedule (New York Convention awards). The grounds for refusal are narrowly construed. See: Business Day, ‘Enforcing Arbitral Awards in Nigeria Under the AMA 2023: Legal Framework, Strategic Challenges, and Comparative Perspectives’ (June 2026), noting that Nigerian courts have adopted an increasingly narrow interpretation of the public policy defence, aligning with international standards.

[6]AMA 2023, Second Schedule: domesticates the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) into Nigerian law. An award made in any New York Convention contracting state may be enforced in Nigeria on application to the court, subject only to the limited grounds set out in Article V of the Convention. This makes arbitral awards obtained in London, Paris, Singapore, and other major arbitration seats directly enforceable in Nigeria.

[7]AMA 2023: the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting the proceedings. Subject to the provisions of the AMA 2023, the tribunal may conduct the arbitration as it considers appropriate, including the power to determine the admissibility, relevance, materiality, and weight of any evidence. This procedural flexibility allows parties to design an efficient and targeted dispute resolution process, unlike the more rigid procedural rules that govern court proceedings.

[8]AMA 2023: the AMA 2023 takes a decidedly pro-enforcement position on interim measures ordered by an arbitral tribunal, permitting a party to pursue recognition and enforcement of an interim measure in a manner akin to an arbitral award. The court is prohibited from engaging in a substantive review of the interim measure. See: International Bar Association, ‘The Nigerian AMA 2023: A Comparison with the ACA 2004 and Global Practices’ (IBA, 2024).

[9]AMA 2023: mediation is now comprehensively governed by Part II of the AMA 2023, which applies to both domestic and international mediation. The AMA 2023 further incorporates the Singapore Convention on Mediation, facilitating the cross-border enforcement of mediated settlement agreements. Mediation is typically faster and cheaper than both arbitration and litigation, and preserves the commercial relationship between the parties, making it particularly suited to disputes between ongoing business partners.