Seven publicly listed firms in Nigeria incurred N34.8 billion as legal fees in the first half (H1) of 2024, from N21.3 billion recorded in the same period of 2023, BusinessDay analysis has shown.
Law experts attribute this surge to the growing regulatory and legal complexity facing companies across various sectors as it is mandatory for all publicly-listed firms to have their accounts audited by auditors.
The surveyed companies included: Seplat Energy Plc, MTN Nigeria Plc, Fidelity Bank, AXA Mansard, Eterna Plc, BUA Foods Plc, and Dangote Sugar Refinery Plc.
Data compiled by BusinessDay revealed that these companies collectively experienced a 48 percent rise in legal fees compared to the corresponding period in 2023.
However, the increase in legal spending associated with regulatory hurdles can affect businesses in various sectors such as financial services, oil and gas, telecommunications, technology, and manufacturing.
Seplat Energy Plc, an energy supplier in Nigeria, recorded the highest rate of legal fees of N22.1 billion in the first half of 2024 from N14.13 billion in H1 2023.
MTN of Nigeria, a leading telecommunication company in Nigeria, also recorded an increase to N9.8 billion in H1 2024 from N5.9 billion in the corresponding period.
Fidelity Bank, a financial institution in Nigeria, saw an 80.4 percent increase of litigation costs to N701.1 million, from N299 million in H1 2023 while AXA Mansard, an insurance company in Nigeria, also saw an increase to N303 million from N145 million.
Eterna Plc, a petrochemical manufacturing company in Nigeria, recorded a 153.2 percent increase to N860 million from N114 million.in the corresponding period of 2023.
BUA food, a fast-moving consumer goods company, also recorded N760 million.legal costs while Dangote Sugar Refinery recorded N310 million.
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According to experts, most Nigerian companies operate across multiple countries, and the fluctuating exchange rate significantly affects their legal expenses when converted into Naira.
Victoria Aderamola, lawyer and data protection analyst at Tech Hive Advisory, highlighted that the surge in legal fees can be attributed to the issue of regulatory fines and foreign exchange rates.
“Regulatory bodies are intensifying their scrutiny of the industries they oversee, and the cost of non-compliance has risen steeply. A notable example is the recent fine of N555.8 million imposed on Fidelity Bank by the Nigeria Data Protection Commission (NDPC). Similarly, the Securities and Exchange Commission this year levied fines of over N200 million on several companies,” she said.
She added that new regulatory obligations initiated in 2024 require all listed companies processing data to register with the Nigeria Data Protection Commission (NDPC).
“Depending on their categorisation, registration fees can reach up to N250,000 and, possibly, there are other similar capital-demanding obligations,” she added.
Additionally, law firms servicing these industries are adjusting their fees to reflect Nigeria’s current economic conditions.
“In January 2023, the exchange rate was approximately 450 naira to 1 US dollar, whereas it now stands at around N1,600. Previously, companies could access foreign currency at more favorable rates through banks, but the flotation of the naira has severely impacted this. This means companies are paying more money for the same services,” Adaramola added.
Suliamon Badmus, a legal practitioner in Lagos State, noted that the rising exchange rate creates a higher demand in salaries of legal practitioners in Nigerian firms and it incurs higher costs when converted.
“Most of the legal practitioners working for Nigerian companies are not in Nigeria, so the corresponding value of dollars to Naira causes an increase in legal and professional fees. Those working in Nigeria would also want an increase due to higher purchasing power of legal documents,” he said.
He added that the introduction of withholding tax for some firms that provide legal services is expected to deduct 5 percent in each of the taxes which makes them charge more to clients.
Tomiloba Babarinde, a legal practitioner, emphasised that unexpected legal challenges like litigation can emerge in Nigerian companies, even with compliance measures in place.
Litigation is the process of resolving disputes through the legal system involving a lawsuit filed in a court of law, where opposing parties present evidence and arguments to a judge or jury, who then make a decision.
“Litigation costs millions of naira/dollars, which result in an increase in legal fees. Companies are advised to explore alternatives for dispute resolution without going to the court and also choose to put their lawyers on a payment plan to reduce extra cost,” she said.
Babarinde noted that most times, legal costs do not mean companies went against certain rules, It happens only when new rules and penalties are introduced after their financials are filed for the year.
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