Debt is a specific amount of money owed by agreement or otherwise. According to Black law Dictionary,  debt refers to “a sum of money due by certain and express agreement; or by bond for a determinate sum, a bill or note, a special bargain, or a rent reserved on a lease, where the amount is fixed and specific, and does not depend upon any subsequent valuation to settle it.”[1] The implication of this definition is that for a debt to arise from a transaction, a specific sum of money must be owed by one person known as the debtor to another known as the creditor.

Individual and corporate debt levels continue to rise at an alarming rate. Most financial institutions are forced to use the debt recovery process provided by the law in order to recoup the debtor’s indebtedness. Most businesses thriving in Nigeria and around the world rely heavily on or have taken loans from banks or other financial institutions. Individuals are no exception to this fact, as most people have received financial assistance from banks or other financial institutions in the form of loans to help them sustain themselves or create a source of wealth for themselves.

Unfortunately, not all corporate entities or private individuals who take out loans can repay them. This default frequently renders the individual or business indebted to the creditor, and depending on the creditor’s discretion, he may have to engage the services of debt recovery agents or explore legal options to recover the amount owed.[2]

Some steps towards debt recovery:

  1. The debtor and creditor are encouraged to explore a mutually beneficial and private settlement. Debt is a civil disputes and it is always best to consider a less contentious and easier option to settle where this is feasible between the parties.
  2. If the above fails, the next step for a creditor should be to retain the services of a lawyer or a debt collector and provide them with all evidence of the debt owed in order for them to determine the best legal channel to use in resolving the dispute, putting in perspective the nature of the debt as revealed by the information available to them.
  3. The lawyer will send the creditor a document known as a “demand letter.”

Letter of Demand

It is a legal document prepared by a solicitor on behalf of a client that demands that the recipient of the letter take or refrain from taking certain actions (s). This document is a condition precedent to instituting an action of debt recovery in court if the occasion eventually demands that such a step be taken.[3] The two most common types of demand letters written in Nigeria includes:

  1. Demand letters for debt repayment or performance of a contract.
  2. Letters ordering a party to stop engaging in certain conducts, for instance an act considered to be defamatory in nature.

What is the Purpose and Relevance of a Demand Letter

The Court of Appeal in Coscharis Beverages Limited v. ITF & Anor[4], per Joseph Shgbaor Ikyegh JCA, stated that when a debt is due to be repaid, the effluxion of time alone does not automatically set the machinery of the law in motion. A creditor must first make a demand for such debt by writing a letter of demand and ensuring that the debtor receives same. An action instituted to recover a debt in court without fulling this crucial condition precedent is most likely going to end fatally against the claimant in such a case.

The position of the court is thus clear, that writing a letter of demand before instituting an action for debt recovery in court is not a matter of courtesy, it is a fundamental requirement of the law and failure to comply with that procedure will not end in favor of any creditor.  Thus, a creditor who wishes to approach the courts in an action for debt recovery must show proof of formal demand for payment. It goes without saying, that the most common proof of this is a demand letter.

How should a Debtor React to a Demand Letter?

A demand letter is a legal document with serious legal consequences for both the creditor (sender) and the debtor (recipient), under the law.[5] When  a demand letter is sent by a creditor to a debtor, it is best not to ignore it like  it’s not  a valuable document or to see it as a piece of paper containing  empty threat, because while a letter of demand can be said to be a lot of things under the law, it is most definitely neither one of the earlier descriptions. The Court of Appeal in Coscharis Beverages Limited v. ITF & Anor (supra) stated emphatically  that “failure of the appellant to respond to the letter, Exhibit A, in a serious situation in which he was charged with liability amounted to admission of the liability so charged.” What this simply means is that where a creditor sends a demand letter to a debtor and such debtor chooses to ignore the letter and not respond to it, the debtor does so at the risk of been deemed to have admitted all the claims stated in the letter including, but not limited to, the sum indicated, dates and circumstances resulting to the issuance of the demand letter.

The best reaction therefore upon being served with a demand letter is to engage the services of a solicitor in order to be provided with cutting-edge legal advice on the appropriate response to be made. Where a debtor refuses to elect this option, he does so at the risk of losing a lot more money than what was owed in the original debt.

If the debtor does not respond to the demand letter, the creditor’s lawyer may now file a court action for debt recovery. It is important to remember that the statute of limitations imposes a 6-year limitation on debt collection,[6] and once that period has passed, the court may dismiss the case,[7] unless the debtor acknowledges the debt to the creditor or his agent. To be considered to have revived the debt, an acknowledgement must be in writing, clear, unequivocal, and unconditional.[8]

It is best practice to institute an action for debt recovery under the ‘fast track court method, which refers to a special proceeding known by names such as ‘Undefended List Procedure’ or ‘Summary Judgement Procedure’ in different jurisdictions across Nigeria. This process is available at the Magistrate Courts, High Courts and the Federal High Court, any of which can be approached after due consideration of the issue of jurisdiction as it relates to the sum involved and the nature of the transaction from which the debt has emanated.

The use of Law Enforcement Agents to Recover Debt

It is not an uncommon practice in today’s Nigeria for creditors to use law enforcement agents like the police, civil defense and military officers to intimidate debtors so that they can pay up their debt. The court has on several occasions ruled against this practice and condemned it totally as unethical both on the part of law enforcement agents and creditors who recruit them for such an unlawful endeavor.[9]

In Okafor & Anor v. AIG Police Zone II Onikan & Ors.,[10] the court held that the police had no right to be involved in a matter of simple loan arrangement between two parties, because such matters fall exclusively in the ambit of civil matter.

However, where there is an allegation of fraud, the police and other law enforcement agencies may be used to bring the suspect in and employ the adequate measures under the Nigerian law to recover the debt. A creditor who uses law enforcement agents to recover debt, when there is no allegation of fraud does not only violates the law, but also opens the door for the debtor to bring an action against them for breach of their fundamental right.


Business expediency and financing individual personal capital project is in many dependent on easy access to loan facilities. Many banks and other financial institutions give out loans to corporations and private individuals for business and other purposes. Unfortunately, not all debtors pay back their loan as at when due and this could become a clog in the process of making loan facilities available.

Fortunately, Nigerian law recognizes this reality and has put in place measures and provisions to facilitate the recovery of debt and aid the progress of commercial transactions. The onus is on individuals and corporate bodies to engage the right professionals to help them facilitate the process of loan recovery.


[1] Black’s law dictionary 10th edition

[2] Yusuf, J.O. 2022. Debt Recovery under Nigerian Law. file:///C:/Users/USER/Downloads/SSRN-id4142402%20(1).pdf, accessed on 25th October, 2022.

[3] Victor, C. 2022. Recovery of Debt in Nigeria: How to go about it. https://, accessed 25th October, 2022.

[4] (2021) LPELR-56849 (CA)

[5] Victor, C. 2022 (supra)

[6] Section 21(1)(a) Limitation law of Lagos State, Chapter 167, Laws of Lagos State, Nigeria

[7] See Adeshi v. Oko & Anor.(2010) LPELR-CA/C/17/2009

[8] See Ihesiaba v. Young Shall Grow Motors Ltd (2016) LPELR-CA-L/1012/2009

[9] See Nzegbuna & Anor v. Okoye & Anor (2018) LPELR-CA/E/164/2012

[10] (2019)LPELR-CA/L/332/2018


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