What due diligence means
Due diligence is checking before you pay, rather than discovering afterwards.
It is not a single document or a legal requirement. It is a process, scaled to the size of the risk, in which you verify the claims the other side has made. Do they own what they are selling. Does the company owe money nobody mentioned. Is the title clean. Are the contracts real.
The phrase is borrowed from corporate transactions but the discipline applies to buying a plot of land in Ibeju Lekki just as much as to acquiring a company.
How it is used
In a business acquisition or an investment, due diligence covers corporate records at the CAC, financial statements, tax position, employment arrangements, material contracts, litigation and intellectual property.
In a property purchase, which is where most Nigerians meet it, it means a search at the state lands registry to confirm the title, checking whether the land was excised from government acquisition, confirming the survey, and verifying that the people signing actually have authority to sell.
For an ordinary supplier relationship it can be as simple as a CAC public search and asking for references.
Key features
- Carried out before money moves, not after
- Scaled to the size and type of the risk
- Verifies claims against independent records rather than the seller's paperwork
- Findings usually feed back into the price or into warranties in the contract
- Documented, so that what was checked and what was found is recorded
How this works in Nigeria
Property is where the discipline pays for itself. A search at the lands registry costs a fraction of the purchase price and reveals whether the title exists, whose name it is in, and whether there are encumbrances.
Family land carries its own trap. A sale by some family members without the consent of the recognised head of the family and the principal members can be void or voidable, which means a buyer who dealt with one enthusiastic relative may own nothing at all.
For companies, the CAC public search is free and immediate, and it tells you whether the entity exists, its status and its RC number. Skipping that step before paying a new supplier is unnecessary risk.
Limits and risks
Due diligence reduces risk, it does not remove it. It works on the records that exist, and Nigerian records are not always complete or accurate.
It also has a cost and a timetable, and in competitive deals sellers push buyers to move faster than proper checking allows. That pressure is itself information. A seller who resists reasonable searches is telling you something.
Worth knowing
For land, verify the seller's authority as carefully as the title itself. Perfect documents signed by somebody without the right to sell transfer nothing.
Questions people ask
What does due diligence mean in simple terms?
Checking that what you are about to buy or invest in is really what the other side says it is, before you hand over money. It is verification, not paperwork for its own sake.
What should I check before buying land in Nigeria?
At minimum, a search at the state lands registry to confirm the title and whose name it is in, the excision and acquisition status of the land, the survey plan, and the authority of the people signing. Where it is family land, confirm that the head of the family and principal members consent.
How long does due diligence take?
For a plot of land, a search can take days rather than weeks. For a business acquisition it typically runs for several weeks depending on the size. Being rushed through it is a warning sign in itself.
Do I need a lawyer for due diligence?
For anything substantial, yes. Registry searches and title verification in particular benefit from somebody who knows how the records are kept and what an incomplete answer looks like. For a small supplier check, a CAC public search is something you can do yourself.
What happens if due diligence finds a problem?
You renegotiate the price, require the problem to be fixed before completion, obtain warranties and indemnities covering it, or walk away. Finding the problem is the point, so a difficult finding is a success rather than a failure.
Documents that use this
Read more on this
Buying Family Land in Nigeria: The Signatures That Make Your Deed Worthless
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