Protecting Your Business Edge: Enforcing Confidentiality and Non-Compete Clauses in Nigerian Employment Contracts

Nigeria’s startup ecosystem continues to face a period of significant restructuring. In Q1 2026, several notable companies, including crypto startup Zap Africa (which reduced its workforce by 44% in February), Quidax, Kuda Bank, and others, implemented major staff reductions.

The increased pace of layoffs and talent mobility has raised important concerns for businesses. When key employees depart, whether through redundancy or resignation, there is a heightened risk that they may join competitors, approach former clients, or disclose sensitive proprietary information, trade secrets, client data, or strategic processes.

Confidentiality and non-compete clauses in employment contracts remain essential tools for safeguarding a company’s competitive advantage during such transitions. However, enforcing these provisions in Nigeria requires careful attention to common law principles and the Federal Competition and Consumer Protection Act (FCCPA) 2018.

This article explores the current legal framework, relevant judicial precedents, and practical steps employers can take to protect their interests effectively.

Understanding the Legal Landscape

Under common law, covenants in restraint of trade, particularly non-compete clauses, are considered prima facie void as they are contrary to public policy. They can only be enforced if they protect a legitimate proprietary interest, are reasonable in duration, geographic scope, and the activities restricted, and serve the broader public interest.

The FCCPA 2018 introduces an important statutory layer. Section 59 prohibits agreements that prevent, restrict, or distort competition. However, Section 68(e) provides a specific exception for employment contracts:

“Nothing in this Act prohibits a contract of service or a contract for the provision of services in so far as it contains provisions by which a person… agrees to accept restrictions as to the work… during or after the termination of the contract and this period shall not be more than two years.”

This provision allows post-termination restrictions in employment contracts, but limits them to a maximum of two years. Any clause exceeding this period is unenforceable, regardless of its reasonableness under common law. For restrictions within the two-year limit, courts will still evaluate them for reasonableness.

Confidentiality Clauses: Stronger but Not Unlimited

Confidentiality clauses generally enjoy stronger judicial support when they protect genuine trade secrets or confidential information that the employee would not have acquired outside the employment relationship. Courts distinguish between protectable information such as customer lists, pricing models, or proprietary software code and general skills or knowledge gained through experience.

The National Industrial Court (NIC) has declined to enforce overly broad confidentiality, non-disclosure, non-solicitation, or non-recruitment clauses where they appear designed more to restrain competition than to safeguard legitimate interests. Similarly, unusually long post-employment confidentiality periods have been struck down as unreasonable.

For ease of enforceability, confidentiality clauses should be precisely drafted to cover identifiable, protectable information and should avoid perpetual durations that effectively function as non-competes.

Non-Compete Clauses: Reasonableness Remains Key

Non-compete clauses face the highest level of scrutiny in Nigerian courts. Judges assess whether the employer has a genuine legitimate interest to protect (such as trade secrets, customer connections, or goodwill), whether the restriction is no wider than reasonably necessary, and whether the clause strikes a fair balance with the employee’s right to earn a livelihood and the public interest in competition.

The foundational test for reasonableness was established by the Supreme Court in Koumoulis v Leventis Motors Ltd (1973). The court held that a non-compete is enforceable only if it is reasonable, considering the nature of the business, the geographical area, and the duration of the restriction. This principle continues to guide judicial decisions.

Successful enforcement of non-compete clause is possible when clauses are narrowly tailored. In Studio Press (Nigeria) Plc v Garnesh Kadoor (2016), the National Industrial Court upheld a two-year non-compete limited to similar business activities within Nigeria and granted injunctions against both the former employee and the new employer.

In contrast, overly broad or poorly introduced clauses are frequently invalidated. In iROKOtv.com Ltd v Michael Ugwu (2020), the court refused to enforce a one-year client restriction added two months after employment commenced, describing it as an unfair labour practice. Likewise, in 7th Heaven Bistro Limited v Mr. Amit Desphande (2015), a three-year nationwide restriction was ruled unenforceable as “inhuman and stifling.”

These cases demonstrate that the NIC requires clear evidence of a legitimate proprietary interest and strict proportionality. Wide, excessively long, or belatedly introduced restrictions are unlikely to be upheld.

Practical Steps for Effective Protection

Given the current wave of restructuring, now is an opportune time to review and strengthen your protective measures:

• Include all restrictive covenants (confidentiality, non-compete, non-solicitation, and related clauses) in the original employment contract or offer letter, signed before or at the start of employment. Adding such clauses later without fresh consideration carries significant risk.
• Define “confidential information” specifically and exhaustively, while clearly excluding general skills and industry knowledge.
• Limit non-compete durations to no more than two years to comply with the FCCPA. Tailor the geographic scope and restricted activities precisely to the employee’s role and the company’s market presence.
• Adopt a tiered approach: Rely primarily on robust confidentiality and non-solicitation clauses, which are generally easier to enforce. Reserve full non-compete clauses for senior executives and key technical staff with access to critical trade secrets.
• Consider including garden leave provisions during the notice period for additional seamless protection.
• Upon an employee’s departure, promptly send a formal reminder letter citing the relevant clauses and potential consequences of breach (copying the new employer where appropriate). Gather evidence quickly and seek urgent interim injunctions at the National Industrial Court if needed.
• Conduct periodic legal reviews of employment contracts with counsel experienced in National Industrial Court jurisprudence, especially as business models evolve.

Final Thoughts

Confidentiality and non-compete clauses continue to serve as important safeguards for Nigerian businesses. However, the FCCPA’s two-year cap and the courts’ insistence on reasonableness mean that generic, boilerplate language is no longer sufficient. Successful enforcement depends on careful drafting, evidence of legitimate business interests, and timely action.

Employers who invest in well-crafted agreements and proactive enforcement strategies will be better positioned to protect their competitive edge while respecting the legal balance between business needs and employees’ right to work. In today’s environment of high talent mobility, enforceability truly begins at the drafting stage.