Imagine spending years training an employee, giving them access to your clients, pricing strategies, business plans and confidential information, only for them to resign and join your biggest competitor. For many businesses, this is more than a staffing issue. It raises concerns about losing clients, exposing trade secrets and giving a competitor an advantage. The immediate reaction may be to ask: Can we stop the employee from joining the competitor?
In Nigeria, the answer is not as straightforward as many employers would like. An employer can take steps to protect its legitimate business interests, but that does not automatically give it the right to prevent a former employee from working for a competitor. The key is understanding the difference between protecting your business and unlawfully restricting someone’s ability to work.
What Does Nigerian Law Say About Non-Compete Clauses?
A non-compete clause is a contractual provision that seeks to prevent an employee from working for a competitor or engaging in a competing business for a specified period after leaving their employer. These clauses are generally treated as restraints of trade. Nigerian courts assess whether a restriction is reasonable, whether it protects a legitimate business interest, and whether it goes further than necessary or unduly restricts the employee’s ability to earn a living. This means an employer cannot simply insert a broad clause into an employment contract and assume that it will automatically be enforceable.
For example, consider a clause that prevents an employee from working for any competitor, anywhere in the world, for five years after leaving the company. That restriction may be difficult to justify, particularly if the employee’s role did not expose them to sensitive information that would warrant such a restriction. It is important to note that protecting a business from unfair harm is not the same as preventing an employee from competing lawfully.
Before taking any action, the employer should review the employee’s employment contract and any separate confidentiality or restrictive covenant agreement.
Three types of clauses are particularly relevant.
Non-compete clauses seek to restrict the employee from working for a competitor or carrying on a competing business after leaving.
Non-solicitation clauses seek to prevent the former employee from soliciting specified customers, clients or employees. Depending on the wording, they may be easier to justify than a blanket prohibition on working for a competitor.
Confidentiality clauses protect information that the employee is not entitled to disclose or misuse, such as trade secrets, confidential pricing, business strategies and non-public customer information.
These provisions serve different purposes. An employer may have a legitimate basis to enforce a confidentiality obligation even where a broad non-compete restriction would not be enforceable. A former employee’s general skills, experience and professional knowledge do not automatically become the employer’s property simply because they were acquired during employment.
The employer should not assume that the employee has breached an agreement simply because they have joined a rival company. Instead, it should establish what the employee has actually done and whether that conduct breaches a valid contractual obligation.
For instance, did the employee take confidential documents, share a customer database, disclose pricing information or use proprietary business strategies belonging to the former employer? These are different issues from simply accepting a job with a competitor.
One of the first reported cases on non-compete clauses under Nigerian law is Koumoulis v Leventis Motors Ltd, in which the Supreme Court stated the general principle on non-compete clauses as follows:
“Generally, all covenants in restraint of trade are prima facie unenforceable at common law. They are enforceable only if they are reasonable with reference to the interests of all parties concerned and of the public.”
The decisions in iROKOtv.com Ltd v Michael Ugwu and Windowstory Nig. Ltd v Peter J. Ayuba demonstrate that Nigerian courts are cautious about enforcing post-employment restrictions that prevent employees from working for competitors. In both cases, the National Industrial Court refused to enforce the restrictions because the employers failed to establish that the restrictions were reasonable and justified by legitimate business interests.
The decisions also highlight an important distinction: protecting confidential information and trade secrets is a legitimate business concern, but that does not automatically entitle an employer to prevent a former employee from earning a living in the same industry.
In iROKOtv.com Ltd v Michael Ugwu, the court applied the principles in Koumoulis v Leventis Motors Ltd (1973) 11 SC 100. It explained that the reasonableness of a restraint of trade must be considered against three interests:
- The employer’s interest.
- The employee’s interest.
- The interest of the public.
The court placed particular emphasis on the employee’s ability to remain employable and earn a living. It held that the restrictions were unreasonable, contrary to public policy and unenforceable.
These decisions illustrate the importance of examining the particular restriction, the business interest being protected and the evidence before the court.
The MTN Case: When a Non-Compete Clause Becomes a Legal Problem
A recent decision of the Court of Appeal brings this issue into sharper focus.
In MTN Nigeria Communications Ltd v Theodore Nwabueze Ikpa (Appeal No. CA/LAG/CV/319/2021), the Court of Appeal, Lagos Division, dismissed MTN’s appeal in July 2026 and upheld a judgment of the National Industrial Court delivered on 13 June 2018.
The dispute concerned a former MTN Procurement Manager whose employment ended in December 2008. His employment contract contained a four-year post-employment restrictive covenant. He challenged the restriction, arguing that it effectively prevented him from securing alternative employment. The National Industrial Court found the four-year restriction unreasonable and awarded him ₦5,101,674 in compensation, together with ₦100,000 in costs.
MTN appealed, arguing, among other things, that the restriction was reasonable and necessary to protect its confidential information and trade secrets, and that the former employee had not sufficiently established his loss. The Court of Appeal rejected MTN’s appeal and affirmed the lower court’s decision. It also upheld the finding that the evidence supported the former employee’s claim that the restriction had caused him hardship in seeking alternative employment. The appellate court awarded a further ₦500,000 in costs.
The decision is significant because it demonstrates that a post-employment restriction can have consequences for the employer where it is found to be unreasonable. A clause intended to protect a business may instead expose that business to a claim for compensation.
However, the case does not mean that all non-compete clauses are invalid or that employers cannot protect confidential information. Its significance lies in the need to justify the restriction and ensure that its scope is reasonable in the circumstances.
The practical lesson is that employers need more than a standard clause in an employment contract. They need a restriction that is proportionate to a genuine business interest and supported by the circumstances of the employee’s role.
Can an Employer Take Legal Action?
Depending on the circumstances, an employer may consider seeking an injunction to restrain the misuse or disclosure of confidential information, enforcing a valid restrictive covenant, or pursuing a claim for breach of contract.
However, the remedy sought should match the interest being protected. An employer seeking to prevent the disclosure of trade secrets may have a stronger basis for targeted relief than one seeking to stop an employee from working in their chosen profession altogether.
The employer should also be cautious about contacting the new employer with allegations that have not been properly investigated. Any legal correspondence should be fact-based, proportionate and carefully worded.
What Should Nigerian Employers Do Before This Happens?
The best time to protect a business is before an employee resigns. Employers should review their employment contracts to ensure that confidentiality, non-solicitation and any non-compete provisions are appropriately drafted. Restrictions should be tailored to the employee’s role, the information they can access, the customers they deal with and the actual risks to the business.
The duration and geographical scope of any post-employment restriction also matter. Section 68(1)(e) of the Federal Competition and Consumer Protection Act 2018 contains a provision concerning restrictions on work in contracts of service for periods not exceeding two years. Its application should be considered alongside the common-law test of reasonableness. Compliance with a statutory time limit should not be treated as an automatic guarantee that a restriction will be enforceable.
Businesses should also implement practical safeguards, including access controls, proper offboarding procedures, the return of company devices and documents, and clear rules on the handling of confidential information.
Most importantly, employers should not rely on a non-compete clause as their only line of defense. Strong information security, sound contract management and a clear understanding of what constitutes confidential information are equally important.
Conclusion
Nigerian law recognizes an employer’s legitimate interest in protecting its business, but it also recognizes the importance of an employee’s ability to earn a living and use their skills. The MTN case is a timely reminder that restrictive covenants must be carefully considered. A clause that goes too far may not provide the protection an employer expects and could expose the employer to legal consequences.
The objective should not be to prevent every former employee from competing. It should be to protect genuine business interests without imposing unreasonable restrictions on someone’s career. For employers, that protection begins with the right contracts, carefully drafted restrictions and practical safeguards put in place long before a resignation letter arrives.
Ayomikun Oreoluwa Onabanjo Esq.
Managing Associate