Debt Collection in Nigeria

The debt collection process in Nigeria begins with an assessment of the debtor’s solvency, their line of business, the history of the business, the availability of documentary evidence of the debt, ongoing court cases and enforcement proceedings, and the ability to dispute the debt. This assessment determines the strategy that will be used on behalf of the client in the collection process.

If the debtor has no ongoing court cases or outstanding judgments for debt collection and is actively engaged in business activities, then it is advisable to use the out-of-court debt collection stage.

This stage involves active negotiations with the debtor to reach an agreement on payment of the creditor’s claims or other possible settlement options (e.g. return of goods, transfer of the debt to a third party, exchange of services or goods).

Interaction with the debtor begins immediately after sending a notice by mail, email, phone or instant messaging. This process involves intensive communication with the debtor in order to exert constant pressure. The main objective is to establish contact with key decision makers to achieve the fastest possible recovery of the debt.

The average time for informal out-of-court collection is up to 60 days (except in cases where a payment plan has been agreed upon). If this stage does not bring the expected results or after an initial analysis it becomes clear that it is not applicable, then you should proceed to collection through the courts.

Before initiating judicial collection, it is worth paying attention to the statute of limitations. The statute of limitations for debt collection is 6 years. After this period, the creditor loses the right to file a claim.

Nigerian law provides for judicial debt collection in the usual judicial and simplified procedure.

The simplified judicial procedure is used to consider debt cases for minor amounts or if the facts of the case are not in dispute. Cases are resolved without the submission of written documents or applications by the parties. These cases are considered by simplified courts – magistrates’ or district courts. In fact, in southern Nigeria they are called Magistrates’ Courts and in northern Nigeria they are called Circuit Courts when they hear cases within their civil jurisdiction. The jurisdiction of Magistrates’ Courts is determined by different rules set for each state.

The ordinary court process applies to all other categories of debt cases. These cases are heard by the High Courts of the states. Each state has its own rules for the initiation and trial of a lawsuit. Mostly, a lawsuit is initiated by a writ of summons. This is a formal document addressed to the defendant requiring him to appear in court to defend himself against the claim of the creditor. It is usually accompanied by an endorsement of the claim or a statement of claim so that the defendant knows about the claim against him. In Lagos State, a summons must be accompanied by a statement of claim, a list of witnesses, written statements, copies of all documents to be relied upon in court, a written address in support of the claim, etc., otherwise it will not be accepted for filing with the registry.

A defendant who is served with a document initiating proceedings must, within the time prescribed in the document of appearance, file with the registry an original and a copy of a duly completed and signed memorandum of appearance.

On the day appointed for appearance, the parties must appear in person or by proxy. If the claim in the original document is a liquid debt and the defendant fails to appear, the plaintiff may apply to the judge for judgment against the defendant for the amount originally claimed.

If the defendant appears in court but the creditor believes that his claim is not defendable by the defendant, the creditor must file with the court a statement of claim, evidence, testimony of his witnesses and a motion for summary judgment, which must be supported by a sworn statement. These documents must be served on the defendant in advance of the hearing to consider such a motion. If the defendant, after receiving these documents, intends to object to the claim, he must file with the court his objection, testimony of his witnesses, material evidence and a sworn statement. After considering the creditor’s motion, the court has the right to either enter a judgment against the defendant and collect from him the claimed amount of the debt, or to grant the defendant the right to defend against the claim.

If the parties appear, the court hears their positions, and if the court understands all the questions of law and fact, the court may proceed to the stage of consideration of the case and make a decision. If the case is not ready for a decision, the court appoints a preparatory investigation. During the preparatory investigation, the parties exchange procedural documents, the court interrogates the parties and witnesses, appoints an expert examination and resolves other procedural issues.

After the preparatory investigation is completed, the case is subject to transfer to the stage of consideration on the merits. At this stage, the court hears the final conclusions of the parties and evaluates the results of the previous stage. Each statement of fact, unless it is directly or indirectly refuted or indicated as inadmissible in the proceedings of the opposing party, shall be considered accepted. When a party denies a statement of fact, it must not do so evasively, but must give a full and substantial answer. After the conclusion of the pleadings, the court makes a decision.

A decision of the Magistrates’ Court or the District Court may be appealed to the High Court of the relevant state within 30 days of its making. A decision of the High Court of a state or the Federal High Court may be appealed to the Court of Appeal within three months of the making of the impugned decision. The decision of the Court of Appeal may be appealed to the Supreme Court of Nigeria within three months of the making of the impugned decision. The decision of the Supreme Court is final and cannot be further appealed.

After the judgment has entered into legal force, the creditor must initiate enforcement proceedings. The limitation period for enforcement of a judgment is 6 years. As part of the enforcement of a judgment, the creditor’s claims may be satisfied by seizing and writing off funds from the debtor’s accounts; seizing the movable and immovable property of the debtor and then selling them; seizing and confiscating securities; seizing and confiscating company shares.

If the debtor is in a state of insolvency, it is advisable to consider the procedure of bankruptcy and liquidation. A debtor is considered insolvent if he is unable to meet his financial obligations as they fall due. A creditor has the right to initiate this procedure if the debt is for a certain amount payable immediately or at a certain future date and the following conditions are met: 1) the amount of the debt is not less than N200,000.00; 2) the debtor has committed an act bankruptcy within three months preceding the initiation of this procedure; 3) the debtor has, for one year prior to the date of filing of the petition, ordinarily resided or had a place of business in Nigeria, either personally or through an agent or manager, or is (or was during the said period) a member of a firm or partnership in Nigeria.

According to the provisions of the Bankruptcy Act, a debtor commits an act of bankruptcy in the following cases: (1) if a creditor (who has obtained a final judgment against the debtor for any amount and the execution of that judgment has not been stayed) has served a notice of bankruptcy on the debtor and the debtor fails to comply with the notice within fourteen days; (2) if execution has been ordered against the debtor by way of seizure of his property in the course of the proceedings and the property has either been sold or is retained by the bailiff for twenty-one days; (3) if the debtor makes a declaration to the court that he is unable to pay his debts or files a petition for bankruptcy against himself; (4) if the debtor suspends or gives notice that he intends to suspend the payment of his debts; (5) if the debtor leaves Nigeria or, if outside Nigeria, remains outside Nigeria or otherwise absconds.

In the event that the debtor’s assets are insufficient to fully satisfy the creditors’ claims, the law provides for the possibility of returning the debtor’s assets and funds by canceling the debtor’s transactions that caused harm to creditors. Such transactions should include, in particular: 1) fraudulent transactions aimed at withdrawing assets during the three months preceding the opening of the procedure; 2) transactions at an undervalued price, made without fraudulent intent within two years from the date of appointment of the administrator or the debtor’s transition to a state of liquidation; 3) transactions made during the three months preceding the start of the liquidation procedure, with the aim of providing an unreasonable advantage to one creditor over others; 4) the provision of a floating lien on the property or enterprise of a company created during the three months prior to the start of the liquidation procedure is recognized as invalid unless it is proven that the company was solvent immediately after the creation of the lien. Carrying out such a return contributes to the increase of the liquidation mass, and this in turn increases the chances of creditors to satisfy their claims in full.

If you have any questions or need support on international debt collection in Nigeria, our company is ready to provide its expert assistance to effectively resolve your financial issue. Contact us for more information and professional support from specialists of the leading debt collection agency.

# DEBT COLLECTION AGENCY NIGERIA

16.12.2024

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