Coping with the Covid-19 pandemic: A comparative study of the capabilities of the Kenyan and Nigerian insolvency frameworks

• Jurisdiction: South Africa
• Date: 31 March 2021
• DOI: https://doi.org/10.47348/JCCL/V6/i2a4
• Pages: 112-138
• Author: Iheme, W.C.
• Citation: (2020) 6(2) JCCL&P 112
• Published date: 31 March 2021

https://doi.org/10.47348/JCCL/V6/i2a4 112

COPING WITH THE COVID-19

PANDEMIC: A COMPARATIVE

STUDY OF THE CAPABILITIES OF

THE KENYAN AND NIGERIAN

INSOLVENCY FRAMEWORKS

WILLIAMS C IHEME*

Associate Professor of Law, Jindal Global Law School, India

SANFORD U MBA†

Senior Counsel, ACAS-LAW Firm, Nigeria

ABSTRACT

The Covid-19 pandemic has undeniably ravaged the global economy

and plunged many countries in Africa, including Kenya and Nigeria

into an economic recession. This article departs from the premise

that credit is the lifeblood of market systems. Accordingly, the credit

and insolvency laws of both countries must be adjusted in certain

ways during and after the pandemic, in order to enable them to cope

with the dire economic challenges resulting from the pandemic. The

article identifies some material defects in the Insolvency Act 2015

(Kenya) and the Companies and Allied Matters Act 2020 (Nigeria),

and argues that these defects will debilitate a meaningful economic

recovery from the pandemic. The paper shows the lack of suitability

of their existing insolvency frameworks, as well as some aspects of the

public law: it proposes a number of tailor-made recommendations

that benefitted from the experiences of certain other common law

jurisdictions.

Keywords: credit crisis; wrongful trading; regulatory capture;

virtual courts; basic education; globalisation; law reform; vulnerable

consumers; administration; liquidation.

* LLB (Benin) BL (Nigeria) LLM & SJD (Central European University).

† LLB (Benin) BL (Nigeria) LLM & SJD (Central European University).

(2020) 6(2) JCCL&P 112

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113

COPING WITH THE COVID-19 PANDEMIC: A COMPARATIVE STUDY OF THE

CAPABILITIES OF THE KENYAN AND NIGERIAN INSOLVENCY FRAMEWORKS

https://doi.org/10.47348/JCCL/V6/i2a4

I INTRODUCTION

Other than the health implications of the Covid-19 pandemic, the

world economy has come under strain as a result of the necessary

measures put into place to contain the spread of the virus. The

International Monetary Fund (IMF) has pointed out that the pandemic

has brought about a recession, worse than the global financial crisis of

the late noughties and comparable to the Great Depression.1 African

economies have not been spared from this economic crisis. Several

sectors which hitherto sustained national income saw a slowdown

in demand and in some cases a complete shutdown. From the icy

waterfalls in the Aberdares in Kenya to the sombre Door of No Return

in Ghana, from the serene Kunta Kinteh Island in the Gambia, to the

Valley of Kings in Egypt, tourism, a major contributor to the GDP of

many an African country came to a near halt.2

Beyond the macroeconomic impact of the pandemic, at the firm

level, otherwise ‘healthy’ businesses have experienced liquidity

constraints, while others have found themselves in the throes of

becoming insolvent. Although some businesses may have shown

resilience, the slowdown in demand remains a source of concern for

such businesses,3 this is because a sustained demand shortfall may

mean that inevitably, these businesses may also run out of liquidity.

In the same vein, individuals have experienced disruptions in income

that have made subsistence nearly impossible. The crippling impact

of the crisis brought about by the pandemic required government

intervention.

This paper examines the impact of the pandemic on the economy

of two African regional countries: Nigeria and Kenya, exploring

the consequences of the crisis and the responses emplaced by their

governments. Given the effect of the pandemic on many enterprises,

this paper inquires into the state of key business legislation and how

their provisions have either supported distressed businesses or for

1 See ‘The Great Lockdown’, available at https://blogs.imf.org/2020/04/14/the-great-

lockdown-worst-economic-downturn-since-the-great-depression/, accessed 7 May 2020;

see also L Song & Y Zhou ‘The COVID-19 pandemic and its impact on the global

economy: what does it take to turn crisis into opportunity?’ (2020) 28/4 China &

World Economy 1–24 at 2.

2 See for example the East African Business Council (EABC), Report on East African

Business Council Snapshot Survey on the Impact of COVID-19 on Business and

Investment in the East African Community Region, available at https://eabc-online.

com/attachments/article/278/EABC%20SNAPSHOT%20SURVEY%2027042020.

pdf, accessed 7 May 2020. (noting that the East African tourism and hospitality

industry had seen a 92 per cent reduction in cash-flow).

3 See The Economist (16 May 2020) ‘Businesses are proving quite resilient to the

pandemic’, available at https://www.economist.com/briefing/2020/05/16/businesses-

are-proving-quite-resilient-to-the-pandemic, accessed 7 May 2020.

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