Contributor: Janet Udoka
Introduction
Credit plays a central role in modern economic activity. Businesses rely on loans, trade credit and deferred-payment arrangements to finance operations, while individuals increasingly use consumer credit to meet personal and household needs. Lenders are more willing to extend credit where the legal system allows valid obligations to be enforced promptly and predictably. When debt recovery is slow, uncertain, or disproportionately expensive, lenders may restrict access to credit, demand excessive collateral, or shift additional risk to borrowers through higher interest rates.
The creditor’s right to recover a valid debt is, however, subject to the law. Debt recovery must comply with contractual obligations, statutory procedures, constitutional guarantees and applicable regulatory standards. A debtor does not lose the right to dignity, privacy or due process merely because an obligation has fallen due. The proper question is therefore not whether creditors should enforce legitimate debts, but how the law can facilitate effective enforcement without permitting harassment, intimidation, unlawful detention, public shaming or misuse of personal information.
This question has become more significant with the growth of digital lending in Nigeria. Technology has simplified loan applications, credit assessment and disbursement, but it has also enabled intrusive collection practices. Some lenders have accessed borrowers’ telephone contacts, sent disparaging or threatening messages to third parties and threatened debtors with reputational or professional harm. These practices demonstrate that contemporary debt recovery is not solely a matter of contractual enforcement; it also raises questions of consumer protection, data governance and fundamental rights.
The Legal Foundation of Debt Recovery in Nigeria
A debt generally arises from a contractual, statutory or other legally enforceable obligation to pay a definite or ascertainable sum. A creditor seeking judicial enforcement must establish the obligation, the applicable repayment terms, the debtor’s default and the amount outstanding, together with the consideration or value supplied where that is relevant to the claim. The creditor must also commence the action within the limitation period prescribed by the law applicable in the relevant jurisdiction.[1]
The creditor should support the claim with credible evidence, which may include the loan agreement, facility letter, invoices, statements of account, acknowledgements of indebtedness, correspondence and evidence of demand. Although a statement of account may be relevant, it does not by itself establish liability. Section 51 of the Evidence Act 2011 expressly provides that entries in books of account or electronic records regularly kept in the course of business are admissible but are not, standing alone, sufficient to charge a person with liability. The creditor must therefore connect the entries to the underlying transaction and demonstrate how the outstanding balance was calculated.[2]
Where the claim is for a liquidated sum, and the debtor has no substantial defence, the creditor may invoke an expedited procedure under the applicable rules of court. Depending on the jurisdiction, this may take the form of summary judgment or the undefended list procedure. These procedures are designed to prevent delay where no genuine dispute requires a full trial. The matter must, however, proceed to trial where the debtor discloses a bona fide defence or raises a triable issue.[3]
After obtaining judgment, the creditor must enforce it through procedures recognised by law. These include writs of attachment and sale, garnishee proceedings and other lawful modes of execution against the judgment debtor’s property. Garnishee proceedings enable a court to attach money belonging to the judgment debtor but held by a third party, commonly a bank. The creditor must comply with the prescribed procedure; a judgment does not authorise private seizure of the debtor’s property.[4]
Secured Credit and the Enforcement of Collateral
Secured creditors generally occupy a stronger position than unsecured creditors because they may enforce a security interest created over identified property. Mortgages, charges, pledges, liens and other security arrangements reduce credit risk by providing assets against which the creditor may proceed if the debtor defaults.
The Secured Transactions in Movable Assets Act 2017 (STMA) strengthened secured lending by providing a statutory framework for creating, registering, prioritising and realising security interests in movable assets. It also established the National Collateral Registry (NCR), an electronic registry through which eligible creditors may register financing statements and search for existing security interests. The regime facilitates the use of assets such as equipment, inventory, receivables and agricultural products as collateral, while registration helps determine priority among competing perfected security interests.[5]
Enforcement of a security interest must nevertheless comply with the security agreement and the STMA. The Act requires good faith and commercial reasonableness, permits repossession subject to statutory safeguards, requires a creditor exercising a power of sale to obtain a reasonable price and, subject to stated exceptions, requires advance notice of sale. It also regulates the statement of account after sale, the distribution of proceeds, and the payment of any surplus. Security therefore strengthens a creditor’s recovery position, but it does not authorise arbitrary or oppressive realisation of collateral.[6]
Creditor Rights and the Limits of Self-Help
A creditor may demand payment, issue formal notices, negotiate a repayment arrangement, institute proceedings and enforce a judgment or valid security interest. The creditor may also appoint a lawyer or recovery agent to act on its behalf. These remedies promote contractual certainty and protect the credit system against deliberate default.
Creditors must exercise their rights within the law. A creditor cannot convert a purely civil dispute into a criminal complaint merely to compel payment, and the police are not debt-recovery agents. Arrest, detention or threats of criminal prosecution should not be used to enforce an ordinary loan or contractual obligation where the facts disclose no independent criminal offence. The position differs where credible facts disclose conduct such as fraud, forgery, or obtaining property by false pretences; even then, the criminal process should address the alleged offence rather than substitute for civil recovery.[7]
Creditors and their agents must also avoid threats, violence, impersonation of public officials, unauthorised entry and seizure of property without legal authority. A contractual clause cannot validate conduct prohibited by statute, public policy or the Constitution. Equally, a debtor’s agreement to receive repayment reminders does not amount to consent to harassment or indiscriminate disclosure of the debt to unrelated persons.
Lawful recovery communications should identify the creditor, state the amount claimed, explain the basis of the claim and give the debtor a reasonable opportunity to pay or dispute the debt. Communications should ordinarily be directed to the debtor, a guarantor or an authorised representative. Contacting employers, colleagues, relatives or friends solely to embarrass or pressure the debtor may expose the creditor or recovery agent to liability for defamation, breach of confidence, privacy violations or regulatory misconduct, depending on the facts.
Debtor Protection under Consumer Protection and Constitutional Law
Debtor protection does not extinguish the obligation to repay a valid debt. Its purpose is to ensure that enforcement remains fair, proportionate and lawful. Sections 34 and 37 of the Constitution of the Federal Republic of Nigeria 1999 (as amended) protect human dignity and the privacy of citizens, their homes, correspondence and communications. Debt-collection practices involving degrading treatment, intimidation or unjustified disclosure of private information may therefore implicate constitutionally protected interests.[8]
The Federal Competition and Consumer Protection Act 2018 (FCCPA) supplies the principal general consumer-protection framework. Among other safeguards, it requires prescribed consumer information to be presented in plain, understandable language; regulates price disclosure; protects consumers against unfair dealings and false or misleading representations; and restricts unfair, unreasonable, or unjust contractual terms.[9]
These safeguards are particularly important in consumer lending, where borrowers may accept standard-form or digital agreements without fully understanding the cost of credit. Lenders should disclose material terms, including the principal amount, interest, applicable fees, repayment schedule and consequences of default, in a form that consumers can readily understand. Lengthy, confusing or inaccessible terms should not obscure material obligations.[10]
Debtors also bear corresponding responsibilities. They should provide accurate information, review the facility’s terms, and make payments in accordance with the agreement. Consumer protection should not shield deliberate default, fraudulent borrowing, or concealment of assets. A balanced framework must protect debtors from abusive practices without undermining contractual discipline.
Data Protection and Digital Debt Collection
The Nigeria Data Protection Act 2023 (NDPA) has direct implications for debt collection. A lender or recovery agent that processes personal data must have a lawful basis for the processing and must comply with the principles of fairness, lawfulness, transparency, purpose limitation, data minimisation, accuracy, storage limitation and security.[11]
Information collected to assess, administer or recover a loan should not be repurposed indiscriminately. A lender may process information reasonably required to identify the borrower, assess creditworthiness, administer repayment and pursue lawful recovery, provided that the processing rests on an appropriate lawful basis. It should not access or use a borrower’s photographs, private messages, call records or contact list merely because the technology makes such access possible where those data are unnecessary for the lending or recovery purpose.[12]
The disclosure of a borrower’s indebtedness to persons drawn from the borrower’s contact list is especially problematic. Those persons are ordinarily not parties to the loan agreement, and the lender must still identify a lawful basis for processing their personal data. The debtor’s default does not suspend the lender’s obligations under the NDPA in relation to either the debtor or third parties.
By contrast, a lender may report accurate credit information through a licensed credit bureau in accordance with the Credit Reporting Act 2017 and other applicable requirements. Regulated credit reporting serves a recognised risk-management and debt-enforcement purpose. It differs fundamentally from circulating threatening, humiliating or defamatory messages to a debtor’s personal contacts.[13]
Regulation of Digital Lending in Nigeria
The Federal Competition and Consumer Protection Commission (FCCPC) initially responded to abusive digital-lending practices through the Limited Interim Regulatory/Registration Framework and Guidelines for Digital Lending 2022. The framework introduced registration and compliance requirements and formed part of the Commission’s regulatory response to privacy violations and unethical recovery practices in the digital-lending market.[14]
The Digital, Electronic, Online or Non-Traditional Consumer Lending Regulations 2025 (DEON Regulations) subsequently introduced a more comprehensive regime for unsecured consumer lending conducted through digital, electronic, online, mobile or other non-traditional means. The Regulations address registration, disclosure and transparency, fair treatment, responsible business conduct, data protection, complaints handling and other consumer-protection obligations. They also prohibit pre-authorised or automatic lending and require clear and accessible loan terms.[15]
An ex parte order of the Federal High Court temporarily restrained implementation of the DEON Regulations in April 2026 in Wireless Application Service Providers Association of Nigeria Ltd/Gte v Federal Competition and Consumer Protection Commission. On 20 July 2026, the Federal High Court dismissed the originating summons challenging the Regulations, upheld their validity and discharged the interim order, after which the FCCPC resumed implementation and enforcement. WASPAN filed a notice of appeal on 21 July 2026 and also sought an injunction pending appeal. Accordingly, as at 27 August 2026, the Regulations remain operative following the first-instance judgment, subject to the pending appellate challenge.[16]
Regulation should not focus exclusively on recovery conduct. Responsible lending begins before a loan is granted. Lenders should assess affordability, avoid misleading advertisements and refrain from extending credit on terms that create an unreasonable likelihood of default. A model built on weak credit assessment followed by aggressive collection practices shifts the consequences of irresponsible lending to consumers and ultimately weakens confidence in the credit market.[17]
Insolvency, Restructuring and Alternative Dispute Resolution
Debt recovery does not always require immediate litigation or liquidation. Where a debtor faces genuine but temporary financial difficulty, restructuring may produce a better commercial outcome than forced execution. Creditors and debtors may agree to revised repayment schedules, interest concessions, standstill arrangements, debt rescheduling or additional security.
For corporate debtors, the Companies and Allied Matters Act 2020 (CAMA) provides restructuring and insolvency mechanisms, including company voluntary arrangements, administration, receivership and winding up. Administration is principally directed at rescuing the company, the whole or part of its undertaking, as a going concern, or achieving a better result for creditors than would likely be obtained through immediate winding up where rescue is not reasonably practicable.[18]
Alternative dispute resolution may also reduce the cost and delay associated with litigation. Negotiation and mediation allow parties to consider the debtor’s financial position, the creditor’s recovery prospects and commercially realistic repayment terms. The Arbitration and Mediation Act 2023 provides a modern statutory framework for mediation and makes mediated settlement agreements binding and enforceable subject to the conditions prescribed by the Act.[19]
Alternative dispute resolution should not, however, be used to pressure consumers into admitting disputed liabilities or waiving statutory rights. Any settlement should be informed, voluntary and accurately recorded. Where the existence or amount of the debt is genuinely disputed, the debtor should have a reasonable opportunity to obtain advice and challenge the claim.
Towards a Balanced Debt Recovery Framework
Nigeria requires a coordinated debt-recovery framework that combines effective enforcement with meaningful debtor protection. Courts should continue to improve the speed of commercial debt proceedings through electronic filing, active case management and prompt determination of claims that disclose no genuine defence. Delays diminish the practical value of judgments and increase the cost of credit.
Regulators and relevant professional bodies should also promote coherent minimum standards for lenders and third-party recovery agents. Such standards should address communication methods, reasonable hours of contact, third-party communications, verification of disputed debts, record-keeping and complaints handling. Creditors should not be able to avoid regulatory responsibility simply by outsourcing recovery to agents acting on their instructions.
Credit reporting should be strengthened while preserving effective procedures for challenging inaccurate information. Accurate credit records reward reliable borrowers and help lenders assess risk; inaccurate, incomplete or outdated information may unfairly exclude individuals and businesses from financial opportunities. The Credit Reporting Act therefore requires credit bureaux to maintain accessible dispute-resolution procedures and to facilitate the correction of inaccurate, invalid, incomplete or outdated credit information.[20]
Most importantly, the legal system should distinguish between inability and unwillingness to pay. Fraudulent borrowing, deliberate asset concealment and calculated default justify firm enforcement. Genuine insolvency or temporary financial distress may be better addressed through restructuring, mediation or orderly insolvency procedures. Treating every debtor as dishonest can destroy viable businesses and reduce the value ultimately available to creditors.
Conclusion
An effective debt-recovery system must protect the enforceability of lawful obligations while preserving dignity, privacy and due process. Creditor rights and debtor protection are not mutually exclusive principles. Predictable enforcement encourages lending and commercial confidence, while responsible recovery practices strengthen the legitimacy of the credit system.
Nigeria’s legal framework now extends beyond traditional contractual and judicial remedies. The FCCPA, the STMA, the Credit Reporting Act 2017, CAMA, the NDPA and the DEON Regulations collectively reflect a broader approach that combines enforcement, secured credit, consumer protection, data governance, responsible lending and insolvency mechanisms.
The central challenge is effective implementation. Nigeria must provide creditors with faster, more reliable enforcement mechanisms while ensuring debtors are not subjected to harassment, unlawful coercion, or privacy violations. A debt-recovery system founded on transparency, proportionality, responsible lending and accountability will protect legitimate creditor interests, safeguard debtors and support the sustainable development of Nigeria’s credit economy.
Reference
- Nze Bernard Chigbu v Tonimas Nigeria Ltd (2006) 9 NWLR (Pt 984) 189. ↑
- Evidence Act 2011, ss 51 and 131–133. ↑
- UBA Plc v Jargaba (2007) 11 NWLR (Pt 1045) 247. ↑
- Sheriffs and Civil Process Act, Cap S6, Laws of the Federation of Nigeria 2004, ss 83–92. ↑
- Secured Transactions in Movable Assets Act 2017, ss 3–6, 10–12 and 23; National Collateral Registry <https://www.ncr.gov.ng> accessed 27 August 2026. ↑
- Secured Transactions in Movable Assets Act 2017, ss 35–36, 40 and 44–49. ↑
- Kure v Commissioner of Police (2020) 9 NWLR (Pt 1729) 296; McLaren v Jennings (2003) 3 NWLR (Pt 808) 470; Ibiyeye v Gold (2012) All FWLR (Pt 659) 1074. ↑
- Constitution of the Federal Republic of Nigeria 1999 (as amended), ss 34 and 37. ↑
- Federal Competition and Consumer Protection Act 2018, ss 114–115 and 124–129. ↑
- Federal Competition and Consumer Protection Act 2018, ss 114–115 and 127–129; Digital, Electronic, Online or Non-Traditional Consumer Lending Regulations 2025, reg 17. ↑
- Nigeria Data Protection Act 2023, ss 24–25 and 39. ↑
- ibid, ss 24–25. ↑
- Credit Reporting Act 2017, ss 7 and 9. ↑
- Federal Competition and Consumer Protection Commission, ‘Limited Interim Regulatory/Registration Framework and Guidelines for Digital Lending 2022’ <https://fccpc.gov.ng/limited-interim-regulatory-registration-framework-and-guidelines-for-digital-lending-2022/> accessed 27 August 2026. ↑
- Digital, Electronic, Online or Non-Traditional Consumer Lending Regulations 2025, regs 3, 7 and 17–22; Federal Competition and Consumer Protection Commission, ‘Digital Lending: FCCPC Tackles Abuses, Issues Landmark Regulations’ (3 September 2025) <https://fccpc.gov.ng/digital-lending-fccpc-tackles-abuses-issues-landmark-regulations/> accessed 27 August 2026. ↑
- Wireless Application Service Providers Association of Nigeria Ltd/Gte v Federal Competition and Consumer Protection Commission (Federal High Court, Lagos, Suit No FHC/L/CS/760/2026, 20 July 2026); Federal Competition and Consumer Protection Commission, ‘WASPAN v FCCPC’ (22 May 2026) <https://fccpc.gov.ng/wireless-application-service-providers-association-of-nig-ltd-gte-waspan-v-fccpc/> accessed 27 August 2026; Emmanuel Agbo, ‘WASPAN challenges FCCPC’s digital lending powers at Court of Appeal’ Premium Times (22 July 2026) <https://www.premiumtimesng.com/business/business-news/897495-waspan-challenges-fccpcs-digital-lending-powers-at-court-of-appeal.html> accessed 27 August 2026. ↑
- Digital, Electronic, Online or Non-Traditional Consumer Lending Regulations 2025, regs 17–22. ↑
- Companies and Allied Matters Act 2020, ss 434–444, especially s 444. ↑
- Arbitration and Mediation Act 2023, ss 82–87. ↑
- Credit Reporting Act 2017, s 6(1)(d), (f)–(g). ↑
