One of the ways by which the economy of a nation is sustained is through the injection of capital. This Capital could be obtained through various means which includes borrowing. Away from the economy, in our daily lives, we often borrow money to meet our daily needs. Borrowing has therefore become a key part of human life and interaction.


For the borrower, the objective is to obtain a loan with minimal interest rate and little or no obligations attached. For the lender, the objective is to lend money with interest in the hope that the money is repaid on the agreed timeline and interest as agreed with the borrower.


On many occasions, the borrower may fail on its obligation to repay the loan as agreed, and as a direct consequence, the lender is left with no option than to take steps to recover the debt.

There are two possible methods of recovery of debt which are by way of civil proceedings and by way of criminal proceedings. These two distinct procedures which could be carried out simultaneously are examined below.

Criminal Proceedings: Criminal Proceedings are only useful when there exist elements of crime. This is because the primary obligation of the police is the detection and prevention of crime and not to act as debt recovery agents. In the case of McLaren v. Jennings (2002) JELR 48008 (CA), the court ruled that the police are not debt recovery agents. Therefore, only where there exists an element of crime such as obtaining under false pretense.; issuance of Dud Cheque and criminal breach of trust if the funds were used in a dishonest manner or diverted for other purpose other than for what it was granted, that criminal proceedings could be instituted. Criminal proceedings are commenced by way of a petition to the police.

Civil Proceedings: The civil proceedings offer varieties of options for the recovery of debt such as:

Making a formal demand for the repayment of the debt: A formal (written) demand for the debt may be made. This demand may carry along with it, threats of civil and criminal actions which may persuade the debtor to make payment.

Institution of debt recovery suit: Once a demand is made and the debt is not repaid, a civil action could be instituted at the Small Claims Court, Magistrates Court, High Court or Federal High Court depending on the amount owed and the nature of the claim. During the pendency of the suit, an application could be made to the court for:

  1. Summary Judgment where there is acknowledgment of the debt.

B         Default judgment where the debtor fails and/or deliberately refuses to appear in court.

  1. Mareva Injunction to freeze the account(s) of the debtor.

    Petition to Wind-Up Company: if the debtor is a company, a winding-up petition may be instituted against the company for its inability to pay debts. A company is deemed to be unable to pay its debt when the Company is indebted in the sum exceeding N200,000 at the expiration of three weeks after a demand has been made for the debt and same remains unpaid.


Recovery in line with the agreement: Most loan agreement usually contain a dispute resolution clause. This clause may provide that any dispute arising out of the transaction should be settled amicably first, and where parties are unable to reach an amicable resolution, the mater could then be referred to Mediation or Arbitration for resolution.

Foreclosure of mortgage: This is applicable to mostly banks and other moneylending institutions. Where a property was mortgaged as part of the transaction and the deed of mortgage is duly registered, the bank could sale off the property without a court order. Where there exists no duly registered mortgage, the collateral may be sold by way of a court order to that effect.

Receivership: This is also only applicable to companies. This option is exercisable where there is an all-asset debenture agreement or such other agreement which empowers the creditor to appoint a receiver over the assets of the company upon default in payment.


Limitations to debt recovery: The process of recovery of debt has its own limitations. The major limitation is the Limitation laws of the various States known as “Statute of Limitation”. By this law, an action cannot be brought against a debtor after six (6) years from the day the cause of action arose i.e., from the day the debt became due.


In conclusion, the process of recovery of debt is only effective depending on the method applied. In determining the method to be applied, recourse should be had to the type of party involved i.e., whether the obligor is a company or an individual. The law prohibits the use of self-help such as threats, violence, seizure of the debtors’ goods/properties, The above highlighted methods are merely to serve as guide on the method(s) to be deployed for effective debt recovery.


Article is written Koko Asuquo Esq.

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