How to Recover Loans from Defaulters in Nigeria, Lawfully

You can recover a loan from a defaulter in Nigeria by contacting the borrower directly at reasonable hours, sending written notices and a lawyer’s letter of demand, calling on a guarantor, and going to court. You cannot shame the borrower, contact their friends, family or employer to pressure them, or use the police to collect an ordinary debt. Breaking these rules exposes a lender to regulatory sanctions and weakens its claim.

Which rules apply to your business?

• Banks, microfinance banks, finance companies and other CBN-licensed institutions: the CBN Consumer Protection Regulations (2019), section 5.5 on debt collection.
• Digital, online and other non-traditional consumer lenders: the FCCPC Digital, Electronic, Online, or Non-Traditional Consumer Lending Regulations 2025, administered by the FCCPC.
• Everyone: the Nigeria Data Protection Act 2023, the criminal law, and the Police Act 2020.

What can a lender lawfully do?

• Contact the borrower directly, by phone, message, letter or visit, between 8.00am and 9.00pm (CBN rules, section 5.5.7).
• Send notices of the outstanding balance before collection starts, as the CBN rules require (section 5.5.1).
• Send a formal letter of demand, ideally signed by a lawyer.
• Ask a guarantor to pay, under the terms of the guarantee.
• Enforce security, as a last resort and with the customer offered a private sale first (section 5.5).
• Sue for the balance, for example at the Lagos Small Claims Court for up to ₦5,000,000 excluding interest and costs (Lagos Practice Direction on Small Claims 2023, Article 2).

What is not allowed?

For CBN-regulated institutions, section 5.5.7 of the CBN rules forbids:

• Contacting a customer’s friends, employer, relatives or neighbours for anything other than their employment status, telephone number or address, unless that person guaranteed the loan or agreed to be contacted.
• Asking any of those people to pay the debt, unless they are a guarantor.
• Calling or visiting the customer between 9.00pm and 8.00am to recover the debt, without the customer’s prior consent.

The same section requires debt recovery to be "transparent, courteous and fair, devoid of undue pressure, intimidation, harassment, humiliation or threat", and makes the institution liable for the actions of the agents it hires (section 5.5.6).

For digital lenders, the FCCPC regulations require business to be conducted in "a responsible, professional and ethical manner" (Regulation 19) and borrower data to be handled in line with the Nigeria Data Protection Act 2023 (Regulation 21). Lenders registering with the FCCPC must confirm that their apps are not designed to access borrowers’ call logs, contacts or photos (Schedule, registration form).

Can the police arrest a loan defaulter?

Not for the debt alone. The Police Act 2020 (section 32(2)) and the Administration of Criminal Justice Act 2015 (section 8(2)) provide that a person is not to be arrested merely for a civil wrong or a breach of contract, and an unpaid loan is a civil matter. If you suspect fraud, take legal advice rather than reporting an ordinary default as a crime.

What are the penalties?

Under the FCCPC regulations, a company in breach can be fined up to ₦100,000,000 or 1% of its turnover in the previous year, whichever is greater; an individual up to ₦50,000,000; and a director can be disqualified for up to five years. Registration can also be suspended or revoked (Regulation 27). Unlawful recovery tactics can also give the borrower grounds for a complaint or a claim, which can undermine your own case.

How should complaints be handled?

Digital lenders must resolve a consumer complaint within 24 hours, or tell the consumer the timeframe, which cannot exceed 48 hours (FCCPC regulations, Regulation 22). Keep a written record of every complaint and how it was resolved.

Every Pandas LP letter of demand is reviewed and signed by a licensed practitioner, is sent only to the borrower or guarantor, and is logged with every reminder and reply, so your file shows a lawful process from start to finish. Loan recovery for lenders.

For the full sequence of steps, see the loan recovery process in Nigeria. For the CBN rules in full, read the CBN rules on debt recovery.

Sources: CBN Consumer Protection Regulations (2019), section 5.5; FCCPC Digital, Electronic, Online, or Non-Traditional Consumer Lending Regulations 2025, Regulations 19, 21, 22 and 27 and the Schedule; Police Act 2020, section 32(2); Administration of Criminal Justice Act 2015, section 8(2); Lagos Practice Direction on Small Claims 2023, Article 2.