How To Recover Debts

Debt Recovery Process in Nigeria

The law has provided for a lawful process and procedure for debt recovery in Nigeria.

To start with, owing debt is a civil wrong, and not 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.

Some of the lawful methods and options to recover a debt in Nigeria include the followings:

  1. Procedure agreed on by both parties in their agreement: It cannot be overemphasized that an agreement should always be drafted when parties are getting into any form of contract, especially when it involves payment from one party to the other. The parties are allowed to include how any obligation or resulting debt owed to another party can be enforced or recovered in their agreement upon a breach by either party. They may resort to using the procedure they have chosen to follow under the agreement, which may include arbitration or any other alternative dispute resolution. The parties may resort to using a neutral third party in resolving the issues if stipulated in the agreement. It could be by way of mediation, which will involve bringing a mediator to help resolve the issues.
  1. Litigation: 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 lawyer acting on behalf of the creditor will commence a debt recovery action and for damages for breach of contract. The lawyer may also bring an application for the preservation of the moveable and immoveable property of the debtor pending the final determination of the court proceedings. Where the debtor is a company, a winding-up proceeding may be commenced along with the action for Summary Judgment against the debtor. It is trite law that in an action for the recovery of debt, the cause of action accrues upon demand for the payment of the debt. Where no demand is made, a cause of action does not arise and no action can be commenced in court. So until such a letter of demand is issued, no right of action would arise and accrue to enable commencement of legal action in a Court of law for the recovery of the debt in question. In the case of Hung v. E.C. Invest. Co. Nig. Ltd, it was held, that: – “In a claim for recovery of a debt, the cause of action accrues when a demand is made and the debtor refuses to pay.”

Upon consultation with the Lawyer, the Lawyer is expected to write a letter to the debtor demanding the funds owed, warning about dire consequences if payment is not received on or before a stipulated date. A letter of demand serves as a pre-action notice for a debt recovery proceeding. The debtor may pay up or negotiate an instalment payment once he or she has received a demand notice.


It is worthy of note that an action for debt recovery is one that has a limitation i.e. an action for debt recovery will be statute-barred if it is not brought on time. The Limitation of Statute Law provides in Section 18 that an action for recovery of debt cannot be brought after 6 years. This means that the law will not allow an action against a debtor if such action is not brought to court within the span of 6 years from the day in which the action arose. It is clear from S. 20 (1) (a) of the Limitation of Statute Law that an action on a simple contract for recovery of debt must be brought to court within six years from the date the cause of action accrued. S. 12 (c) states the consequences of the failure to comply with S.20 (1) (a) of Act. It is stated clearly that the right of action shall cease to exist and therefore not be exercisable after the expiration of the 6 years as was held in the case of Okonta & Anor V. Egbuna (2013) Lpelr-21253(Ca)

In concluding, we should also point out that self-help is not advisable as the court frowns at extra-judicial measures at debt recovery. Self-help may include the use of threats, violence, malicious destruction of the debtor’s goods or property, or the arrest and detention of debtor by the Police. With the use of self-help, a debtor may successfully prosecute an action for the enforcement of his fundamental rights and for the award of punitive compensatory and monetary damages against the creditor. Thus, it is always advisable to follow due process when trying to recover a debt.

However, where debt is accrued through a commission of a crime, which includes entering an obligation by dud cheque; fraudulent misrepresentation; or advance fee fraud, the creditor may institute a criminal complaint against the debtor with the Nigerian Police Force or Economic and Financial Crimes Commission(EFCC).


By Litigation, Arbitration & Disputes Resolution Team at Resolution Law Firm


Tel: +2348099223322