For commercial businesses operating in Nigeria, going to court can be painfully slow and costly. The court should always be the last resort for resolving business disputes. A first-instance case can sometimes drag on for years due to congested dockets and long trials.[1] Fortunately, companies do not have to resolve their business disputes through litigation alone. Instead, they can explore Alternative dispute resolution (ADR) methods like negotiation, mediation, conciliation, and arbitration, which tend to settle conflicts faster and more amicably.[2]

ALTERNATIVE DISPUTE RESOLUTION IN NIGERIA

The enactment of the Arbitration and Mediation Act (AMA) 2023 represents a quantum leap in Nigerian dispute resolution, replacing the outdated 1988 Act and aligning the national framework with global best practices, notably the 2006 UNCITRAL Model Law.[3] This modern legislation provides core systemic advantages that make ADR mechanisms the preferred pathway for resolving business disputes. Key advantages include:

1. Confidentiality: Court proceedings are public, exposing sensitive commercial strategies, consumer class actions, and reputational fallout. ADR mechanisms, by contrast, offer privacy, ensuring that proprietary business information remains protected throughout the process.

2. Specialized Expertise: Arbitrators are often seasoned professionals with specific subject-matter expertise in areas such as energy, finance, maritime law, or construction. This ensures that complex technical disputes are decided by adjudicators who understand the industry specifics, leading to decisions that are arguably more technically sound than those rendered by general jurisdiction judges.

3.     Speed and Flexibility: ADR usually resolves disputes much faster and at lower cost than litigation. Courts can take years, whereas mediation might conclude in a day or two. The core resolution process is structurally designed to be faster and more adaptable than rigid court procedures. [4]

HOW TO RESOLVE A BUSINESS DISPUTE IN NIGERIA WITHOUT GOING TO COURT

It is worthy of note that Arbitration and other forms of Alternative Dispute Resolution (ADR) are given constitutional backing as a means of settlement of disputes in Nigeria. Specifically, Section 19(d) of the Constitution of the Federal Republic of Nigeria (CFRN)1999 provides for the settlement of disputes by Arbitration, Mediation, Conciliation, Negotiation, and Adjudication. Therefore, the following are ways to resolve a business dispute in Nigeria without necessarily going to court.

1.   Negotiation:

Negotiation is a process in which two or more parties hold discussions in an attempt to develop an agreement on matters of mutual concern. No third party is involved, and any settlement is entirely voluntary. Because it is flexible and informal, negotiation is usually the first step, and it is believed to be the most satisfactory method of dispute settlement. It involves discussions or dealings in a matter with the intention to reconcile differences and establish areas of agreement, settlement, or compromise that would be mutually beneficial to the parties. For business disputes, the ideal approach is a problem-solving strategy, where parties focus on achieving a solution satisfactory to both sides, particularly when they anticipate future dealings.[5]

2.   Conciliation:

In Nigeria, the Arbitration and Conciliation Act (CAP 19- LFN 1990)[6] provides for the right to settle disputes by conciliation as contained in Part II of the Act (Sections 37 to 42 and 55). Conciliation involves a neutral third person who assists conflict parties in exploring settlement opportunities. The conciliator plays an advisory role and may actively intervene to propose feasible solutions. Conciliation is particularly useful when parties are extremely polarized or have experienced heavy losses, as it helps resolve preliminary issues and prepares them for constructive negotiation.

3.   Mediation:

Mediation is a voluntary process where a neutral facilitator assists parties in reaching a mutually acceptable agreement, allowing the parties to retain control over the outcome. This process is highly favoured for maintaining goodwill, which is crucial in the Nigerian business environment where personal relationships often determine long-term success.[7]

In Nigeria, mediation is widely encouraged. For example, Lagos State established the Lagos Multi-Door Courthouse (LMDC), Africa’s first court-connected ADR centre, to offer free or low-cost mediation for all kinds of disputes. Settlements achieved at LMDC can be entered as the final court judgments, which can only be appealed under very extreme circumstances, like fraud.

4.   Arbitration:

Arbitration is the most formal non-litigation option. Here, the parties submit their dispute to one or more arbitrators (often experts), who hold a private hearing and then issue a binding award. Under the Arbitration and Mediation Act 2023 (AMA 2023), arbitration has been recognized as a legitimate alternative to court. The major change under the 2023 Act is that Nigerian arbitration law now closely follows the UNCITRAL Model Law, giving clearer rules for international cases and making court referral mandatory for valid arbitration clauses.

It is also important to note that an arbitration award is enforceable in Nigeria, much like a court judgment. The AMA 2023 even incorporates the New York Convention, meaning foreign arbitral awards and contracts can be enforced in Nigeria. Because arbitrators can be chosen for their technical expertise, arbitration is popular in industries like oil and gas, construction, telecoms, and finance.[8]

PREVENTIVE STEPS A BUSINESS CAN TAKE TO AVOID POTENTIAL DISPUTES

The most effective step a business can take to avoid litigation is pre-dispute planning, and this involves the establishment of robust frameworks within contracts for resolving conflicts amicably and efficiently. They include:

A.   Avoiding Ambiguous Clauses:

Dispute resolution clauses must be drafted with meticulous care, not rushed as midnight clauses tacked to the end of a contract. Ambiguous or vague clauses are the primary cause of ADR failing and inviting judicial intervention. The agreements must express a clear and unequivocal intent to submit disputes to binding resolution and must specify essential elements.[9]

B. Mandatory Multi-Tiered Approach:

Experts strongly recommend implementing a multi-tiered dispute resolution clause that mandates a clear hierarchy of steps. This structure ensures that parties must first attempt to resolve their differences consensually before escalating to adversarial arbitration. For instance, a clause might mandate negotiation, followed by mediation, and only then proceed to arbitration if the prior steps fail. This is vital for ensuring internal alignment and exhausting all relationship-preserving options before subjecting the matter to a binding adjudicatory process.

Resolving business disputes without recourse to full-scale litigation is entirely feasible and strategically advantageous within the Nigerian commercial landscape. As the courts and legislators increasingly back Alternative Dispute Resolution, out-of-court settlement has become the smart choice for most businesses, because in the end, resolving a business dispute outside the courtroom often means getting a fair outcome and getting it quickly.

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[1] How Alternative Dispute Resolution Made A Comeback In Nigeria’s Courts accessed December 7, 2025 via https://africaresearchinstitute.org/wordpress/publications/counterpoints/alternative-dispute-resolution-made-comeback-nigerias-courts/

[2] Dispute Resolution: Two ways to expedite Nigerian disputes | IFLR1000, accessed December 7, 2025, https://www.iflr1000.com/NewsAndAnalysis/dispute-resolution-two-ways-to-expedite-nigerian-disputes/Index/4145

[3] The Nigerian Arbitration and Mediation Act 2023: A Comparison with the Arbitration Conciliation Act 2004 and Global Practices | International Bar Association, accessed December 8, 2025, https://www.ibanet.org/the-nigerian-arbitration-and-mediation-act-2023

[4] The Role Of Arbitration In Resolving Disputes In Nigeria – Global Law Experts, accessed December 8, 2025, https://globallawexperts.com/the-role-of-arbitration-in-resolving-disputes-in-nigeria/

[5] Alternative Dispute Resolution Methods in Nigeria – CSAAE, accessed December 9, 2025, https://csaaeinc.org/alternative-dispute-resolution-methods-in-nigeria

[6] Arbitration and Conciliation Act (CAP 19- LFN 1990)

[7] Nigeria – Global Guide to Alternative Dispute Resolution, accessed December 8, 2025, https://ezine.eversheds-sutherland.com/global-guide-to-alternative-dispute-resolution/nigeria

[8] Arbitration-related litigation in Nigeria: recent judicial developments and their cross-border implications | International Bar Association, accessed December 9, 2025, https://www.ibanet.org/arbitration-related-litigation-in-nigeria

[9] Drafting Effective Arbitration Clauses – Avoiding Pathological Clauses – Omaplex Law Firm, accessed December 10, 2025, https://omaplex.com.ng/drafting-effective-arbitration-clauses-avoiding-pathological-clauses/

Written by Olufe Popoola and Olatunji Bamidele for The Trusted Advisors

Email us: info@trustedadvisorslaw.com

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