Authored By : 


To sustain and grow a functional economy, investors often require loans which are made available by banks or other financial institutions using their depositors’ funds upon security furnished for the repayment of such loans by the borrowing investors. As simple as the credit transaction may appear, most of the times borrowers default in the repayment of the loans availed to them, an action which constitutes a potential source of systemic failure of the financial systems of many developing countries, but more particularly, Nigeria’s. 

Digging deeper, though defaulting on a credit transaction seems like the simplest example for debt situations, there exist a plethora of other scenarios in which a debt can occur. For instance, a contractor reneging on an agreement to render a particular service, or even a defendant failing to pay a court-imposed sum to the claimant, all these scenarios in their little bits, however remote they seem, contribute to the aforementioned financial instability in Nigeria in the grand scheme of things.

Habitually, creditors make the mistake of hiring the police to arrest and/or detain the debtors until they are able to raise money to pay the debt. For instance, in the case of a company, the owner of the company is the one arrested and he or she is only released when the debt has been settled. The flaw in this procedure is the fact that owing a debt is a civil wrong and not a criminal wrong. Thus, the Police and other security agents may not have the power to arrest a debtor except the debtor, through the commission of a crime incurs such debt. Besides, it does not follow the common law principle that states that limited liability companies are legal entities, which are separate and distinct from their proprietors. Despite the somewhat “effective” nature of this extrajudicial measure, it does not constitute a legal means of debt recovery in Nigeria as it typically encompasses making legal demands before exploring the option of instituting an action in court.

There are lawful procedures to recover debts owed without violating the rights of the parties in issue, and it is important to note that there is a statute of limitation for debt recovery that arises from a simple contract, which is six years, excluding the year the contract was entered into and executed; a provision contained under Section 21(1) (a) of the Limitation of Action Law.

 Some of these procedures are:

Letter of Demand or Claim

The first step is to write a demand letter to the debtor, warning about the consequence to ensue if payment is not received within a stipulated time (usually 7 days). The demand letter will also contain steps to be taken where payment is not received. Pursuant to the High Court of Lagos State (Civil Procedure) Rules 2019, parties are mandated to write a Letter of Claim, where legal action is contemplated for debt recovery.


This is an Alternative Dispute Resolution (ADR) mechanism and is more common where the parties in debt recovery disputes are corporate organizations. The proceedings can be done privately without resorting to court actions. In this procedure, parties submit voluntarily to it and the arbitrator(s) makes a binding decision on the debt recovery. It is important to state that unless parties have by their own agreement or contract previously agreed to submit to arbitration in the event of a dispute, no party can be compelled to submit to arbitration.

Summary judgment

Summary judgment is a fast approach to recover the indebtedness of a person or entity especially when the debt is undisputed or has been admitted by the writing of letters or issuance of cheques or other forms of communication. As the name goes “summary judgment” is a judgment obtained summarily, without going through the rigours of a full trial. In some Nigerian jurisdictions like Lagos, it is provided for under Order 13 of the High Court of Lagos State {Civil Procedure} Rules 2019, whereas in Abuja it is provided for under Order 11 of the High Court of the Federal Capital Territory (Civil Procedure) Rules 2018, and Order 35 of the High Court of the Federal Capital Territory (Civil Procedure) Rules 2018, which also provides for actions in the “undefended list”.

It should be noted that the sum being claimed must be liquidated money demand {that is the sum must be arithmetically ascertainable and precise}. The Creditor must also have the belief that the Debtor has no defence to the sum being claimed.

Once judgment is obtained, the Creditor can enforce the judgment against the Debtor, without further delay. You can read our article that bothers on enforcing a judgment

Debt recovery action in Court

Where overdue debts arose from a service contract or loan agreement, the requirements for the enforcement of the right of the aggrieved party or lender are usually specified and provided for under the commercial contract or loan agreement. It is the Court that has the power to hear and determine an action for debt recovery and enforce payment against a stubborn debtor. A debt recovery action will be commenced and seeking damages for breach of contract. It is also possible to bring an application for the preservation of the moveable and immoveable property of the debtor pending the final determination of the Court process. Where the debtor is a company, a winding-up proceeding may be commenced along with the action for Summary Judgment against the debtor.

Criminal Complaint To Security Agencies

Although security agencies such as the Nigerian Police and Economic and Financial Crimes Commission (EFCC) as earlier stated above are not empowered to collect debts, there are, however, some debts that are derived from the commission of crimes that can be reported to security agencies. Section 14(2) of the EFCC (Establishments) Act enables the commission to compound an offense. Therefore, if any individual or Company or its Directors obtained services or products from any party with the intent to defraud or induced the contract by false pretense, this constitutes an economic crime for which the foreign party may petition the Economic and Financial Crimes Commission (“EFCC”) and criminal investigation maybe be conducted against such entity for their assets to be frozen towards payment of the debt and criminal prosecution or either of the two.

In conclusion, it is necessary for creditors to not resort to self-help whenever they intend to pursue a debt recovery matter as this amounts to extra-judicial measures which are frowned upon by Courts. Self-help may also expose the creditor to liabilities for assault, battery, unlawful detention, false imprisonment, constitutional rights abuse, etc. as the debtor may successfully prosecute an action for the enforcement of their fundamental human rights which would lead to the award of punitive compensatory and monetary damages against the creditor, which may, by far, exceed the debt owed. It is therefore advised that professional legal help must always be sought in matters relating to debt recovery.


+ posts
Share on facebook
Share on linkedin
Share on whatsapp
Share on email
0 0 votes
Article Rating
Notify of
Inline Feedbacks
View all comments