Procedures for Debt Recovery in Nigeria

People are conducting business everyday and services are being continuously rendered. Money is in circulation around us and it is not uncommon for debt to arise where there is money in circulation. This could be as a result of failure to repay a loan or failure to pay for services rendered.

What is Debt Recovery?

This occurs where a loan goes unpaid by the Debtor (the receiver of the loan) to the Creditor (the giver of the loan) and the Creditor attempts to recover that loan from the Debtor.

Parties in Debt Recovery

The two key parties in debt recovery are the creditor and the debtor.

As a Creditor or as a Debtor, being aware of the process of debt recovery and its surrounding laws is beneficial, whether to let you be aware of how to recover your money or how to protect yourself from persistent and over eager Creditors.

Procedures for Debt Recovery

Demand for Payment

The starting point in any legal action relating to Debt Recovery is whether there has been a demand for the payment of the debt.  In a claim for recovery of a debt, the cause of action accrues only when a demand has been made and the debtor has refused to pay. Where there has been no demand made, a cause of action does not arise and no action can be commenced in court. The important question here is “how then do you lawfully demand for debt payment?”. 

How to Lawfully Demand for Debt Payment?

The key word here is “lawfully“. As a creditor, you must never employ the use of threats, intimidation, violence or even the police, as a means of getting  owed money. Unless where debt is accrued through the commission of a crime, for instance fraud, failure to liquidate debt is a civil wrong and not a criminally offence. As such, the police do not have the power to arrest or prosecute a debtor. As a creditor you should be aware that the use of force, intimidation or involvement of the police in debt recovery leaves you open to liability and an action in battery, assault, breach of fundamental human right, unlawful detention or false imprisonment. As a debtor, you must be aware that it is against your constitutional guaranteed fundamental human rights to be arrested by the police based solely on failure to liquidate debt.

The proper procedure to demand for debt is through a letter of demand, and it is best to engage the services of a legal practitioner at this point. The lawyer would draft a letter of demand to be served on the debtor usually stating the names of the parties, the amount owed, the date within which the owed sum is to be paid and the legal consequences should the debtor fail to pay to debt within the stipulated time. Where the debtor fails to pay within the stipulated time, the lawyer can then commence an action for recovery of debt in the appropriate court.

Alternative Dispute Resolution

Apart from litigation, as a Creditor, you can also recover debt through alternative dispute resolution. Often times, the people who we loan money to and the people who we loan money from, are friends, colleagues or relatives. In order to preserve the future relationship between the creditor and debtor, it is advisable to first of all attempt to resolve the dispute amicably through alternative dispute resolution mechanisms such as mediation, negotiation and arbitration. The creditor and debtor can try to resolve the dispute themselves or can involve a third neutral party to facilitate the amicable settlement. In comparison to litigation, settlement through this method is faster, less costly, more flexible and at the end of the day the relationship between the parties can be maintained.

Alternatives to litigation are:


This is an alternative to litigation in which a neutral mediator assists the parties through constructive discussion and negotiation of their issues in order to reach a mutually acceptable resolution.


Black’s Law Dictionary defined it as;

A consensual bargaining process in which the parties attempt to reach agreement on a disputed or potentially disputed matter. Negotiation usually involves complete autonomy for the parties involved without the intervention of third parties.

This means parties try to reach a consensus/ agreement as to whatever issue they are facing without the need of a third party.


It is a process by which parties to a dispute submit their cases to a neutral third party for settlement. This involves the reference of a dispute or difference between not less than two parties for determination in a judicial manner by a person or persons other than a court of competent jurisdiction.

Here, parties submit their dispute to a third party to help them determine their issue. The decision given at the end of an Arbitration settlement is called an Award and it is binding on the parties involved. The Arbitration and Conciliation Act governs Arbitration in Nigeria.

How to recover debts in Nigeria.

Loan Agreements

Additionally, it is prudent and wise for parties when dealing with lending or borrowing money, to enter into a loan agreement. A loan agreement will afford  parties an easy and less strenuous process when dealing with debt recovery. This is due to the fact that a well drafted loan usually spells out clearly the rights, responsibilities and obligations of both parties and most importantly also states the procedure for recovery and enforcement in the event that there is a breach by any of the parties. The agreement can provide for the use of alternative dispute resolution or litigation and once both parties have agreed, they are bound by the terms of the contract.


Finally, it is important to note that an action for debt recovery must be brought to court within the span of 6 years from the day in which the action arose. Where the action is not brought within this time, the case would be statute barred, the right of action would cease to exist and such a case would no longer be entertained by the courts of law.



7 comments on “Procedures for Debt Recovery in Nigeria”

  1. Thanks for this,

    Out of anger, almost contracted the police to arrest my debtor, but then I now know better.

  2. I don’t see the sense in making a debt recovery case statute barred after 6 year period. Time doesn’t do away with the pain of loss and betrayal from a loan defaulter

    1. Statute of Limitation is introduced in order to urge people to exercise their rights quickly. The more time is wasted, the more difficult it could be to gather evidence.

  3. Please in a case where there was no written agreement of any sort. A situation where a close friend asked for financial assistance to be refunded in a stipulated period but has refused to pay back. What do you do legally?

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