AI agents for business finance: what they can and can't do
What AI agents can do in bookkeeping, close, collections and compliance today, where a person must stay in charge, and how to judge a product.
The short answer
A non-compete clause in a Nigerian employment contract is enforceable only if the employer shows a legitimate interest to protect and the restraint is reasonable in length, scope and area; the Supreme Court held in Koumoulis v Leventis Motors (1973) that such restraints are prima facie unenforceable. Recent National Industrial Court decisions have struck down one- and two-year bans, and in one case indicated that three months would have been enough.
The starting point: presumed unenforceable
Nigerian courts follow the common law on restraint of trade. In Koumoulis v Leventis Motors Ltd (1973), the Supreme Court held that covenants restraining an employee after employment are prima facie unenforceable, unless they are reasonable in the interests of the parties and the public. The Court of Appeal in Vee Gee (Nigeria) Ltd v Contact (Overseas) Ltd (1992) added that a restraint will be enforced only if it is "not wider than reasonably necessary for the protection of the covenantee" and does not harm the public interest. Both are discussed in an August 2024 analysis by Dentons ACAS-Law for the International Bar Association.
The test courts apply
Read together, the cases ask four questions:
- Is there a legitimate interest? Trade secrets, confidential customer lists or truly sensitive information qualify. A wish to stop a good employee joining a rival does not.
- Is the duration reasonable? Months rather than years is the safer range.
- Is the scope reasonable? A ban on working for direct competitors in the same line of business is more defensible than a ban on the whole industry.
- Is the area reasonable? A city or region where you actually trade, not "anywhere in the world".
What recent National Industrial Court cases show
| Case | What the restraint said | Outcome |
|---|---|---|
| iROKOtv.com Ltd v Michael Ugwu (NICN, 12 Nov 2020) | Two years not working for a direct competitor, in an agreement given two months after he started | Unenforceable: imposing it after he began work was an unfair labour practice, and no legitimate interest such as trade secrets was shown |
| Interswitch Ltd v Christopher Esumeh (NICN, judgment 28 Feb 2022) | One year not joining a rival, "in any other organisation all over the world" | Unreasonable, and against the employee's constitutional right to a livelihood; the court favoured three months as sufficient |
| Viramsun Nigeria Ltd v Nitesh Kumar (NICN, 5 Nov 2015) | One year, nationwide | Struck down as too broad; the employer did not operate nationwide |
| The Lacasera v Gangahharan (NICN, 17 Mar 2016) | Five years, on a former chief operating officer | Excessive, particularly as the new role was distinct |
| 7th Heaven Bistro Ltd v Amit Desphande (NICN, 27 Sep 2018) | Three years, no work for any Nigerian employer | Described as "inhuman, stifling, and an unfair labour practice" |
| Infinity Tyres Ltd v Sanjay Kumar (NICN, 7 Oct 2018) | One year, no other company in Nigeria | The court severed the clause: the blanket bar fell, the reasonable parts survived |
| Overland Airways Ltd v Captain Raymond Jam (NICN, 15 Apr 2015) | A training bond requiring four years' service after sponsored training | Enforced as reasonable; a bond for training costs is treated differently from a post-employment ban |
The pattern is clear: the National Industrial Court scrutinises restraints closely and applies international best practice under its own statute. Long, worldwide or after-the-fact restraints fare badly. The Infinity Tyres case is a useful warning for both sides: a court may cut out the unreasonable part and enforce what is left, so an employee cannot assume the whole clause disappears. These cases are summarised in an April 2025 SimmonsCooper Partners article on Mondaq.
The competition law angle
The Federal Competition and Consumer Protection Act 2018 adds a statutory layer. As the IBA article explains, section 59 prohibits agreements in restraint of competition, but section 68(e) exempts contracts of service that restrict a person from working during or after the contract, provided the period is limited, "this period shall not be more than two years." Two years is therefore an outer limit, not a safe harbour; Interswitch shows a court can strike down one year under the common law test.
What tends to hold up, and what does not
| More likely to be enforced | Less likely to be enforced |
|---|---|
| Confidentiality clauses protecting real trade secrets | Blanket bans on working in the industry |
| Non-solicitation of named clients the employee handled, for a short period | Restraints of a year or more without a clear reason |
| Training bonds tied to the actual cost of sponsored training | Worldwide or nationwide restraints for a local business |
| Restraints agreed at the start, with the offer | Restraints imposed after the employee started, without new benefit |
Practical points for employers and employees
If you are drafting one
- Put it in the offer letter or contract signed at the start.
- Define the protected interest: named clients, specific confidential information.
- Keep it short. The IBA authors suggest three months or less as the realistic range after Interswitch.
- Limit it to direct competitors in your actual line of business and area.
- Rely mainly on confidentiality and non-solicitation, which courts accept more readily.
If you are an employee bound by one
- Read exactly what it restricts, for how long and where.
- Note when you signed it. A restraint added after you started, without anything new in return, was criticised in iROKO.
- Confidentiality duties usually survive regardless; do not take client lists or documents.
- Take legal advice before resigning to join a competitor if the clause is wide.
Notice periods are a separate issue; see notice periods under the Labour Act. Where a dispute does arise, our guide to taking a claim to the National Industrial Court explains the forum. For first-time employers, hiring your first employee covers what to put in the contract.
Where Pryme fits
A Pryme Business Account's Compliance agent can keep signed contracts and their key dates in one place and prepare reminders, with a person approving anything that needs action.
Questions people ask
Is a non-compete clause legal in Nigeria?
It is legal to include one, but courts presume it unenforceable unless the employer shows a legitimate interest and the restraint is reasonable in time, scope and area.
How long can a non-compete last in Nigeria?
The FCCPA 2018 caps exempted restraints in contracts of service at two years, but the National Industrial Court has struck down one-year bans and in one case favoured three months.
Can my former employer stop me joining a competitor?
Only if the restraint is reasonable and protects a real interest such as trade secrets. Wide or long bans have been held unenforceable by the National Industrial Court.
Is a training bond the same as a non-compete?
No. A bond requiring service after sponsored training was enforced in Overland Airways v Jam (2015), as it protects the cost of training rather than banning competition.
Sources
- International Bar Association (Dentons ACAS-Law): Employment agreements and non-compete clauses in Nigeria (27 Aug 2024) · accessed Oct 2026
- Mondaq (SimmonsCooper Partners): Navigating non-compete agreements in Nigeria (23 Apr 2025) · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.