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📚 An Overview of Nigeria’s Money Lending Laws

  • Writer: Damilola Fadumila
    Damilola Fadumila
  • Jun 21
  • 3 min read
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By the Financial Regulation & Compliance Team at O.I.D. Legal Consult📧Email: oidlegalconsult@outlook.com 📞 Tel/WhatsApp: +2348168868476


⚖️ Introduction

Money lending in Nigeria is subject to a combination of federal and state laws, regulatory frameworks, and judicial interpretation. These laws aim to protect borrowers from exploitation while ensuring that lenders operate legally. This article provides a structured overview of the regulatory landscape, licensing obligations, and relevant case law surrounding money lending in Nigeria.


1️⃣ Legal Framework Governing Money Lending

a. Money Lenders Act (1958)

This federal law provides the foundational legal structure for money lending across Nigerian states.

  • License Requirement: All money lenders must obtain a state-issued license.

  • Interest Rate Limit: While the Act discourages excessive interest, no specific cap is set—leaving courts to determine what qualifies as “unconscionable.”

  • Loan Agreements: Must be in writing and duly signed. Digital consent (via apps) is now widely recognized.


b. State-Specific Money Lending Laws

Many states have enacted their own rules supplementing the Money Lenders Act.

  • Lagos State Money Lenders Law (2009): Enforced by the Lagos Ministry of Home Affairs; mandates licensing and imposes penalties for default.

  • Rivers State Money Lenders Law (2013): Similar provisions on registration, oversight, and consumer protection.


c. Central Bank of Nigeria (CBN) Regulations

  • Microfinance Guidelines (2005): Regulate micro-lenders, often involved in retail credit.

  • Consumer Protection Framework: Enforced under the CPC Act, Cap C25 LFN 2004.

  • Monetary Policy Circular No. 33 (2014): Caps bank interest rates on credit facilities at 30% per annum.


d. Other Relevant Laws

  • Banks and Other Financial Institutions Act (BOFIA) 2020: Governs institutional lenders and bank-related lending.

  • General Contract Law: Every loan agreement must comply with legal principles like offer, acceptance, and consideration.


2️⃣ Regulatory Authorities for Lending Operations

🔹 Central Bank of Nigeria (CBN)

Regulates licensed banks, microfinance institutions, and approves financial products.

🔹 State Licensing Authorities

Each state has its own money lending licensing authority:

State

Licensing Body

Lagos State

Ministry of Home Affairs & Tourism

Rivers State

Ministry of Commerce & Industry

Other States

Usually Magistrate Courts or Commerce Ministries


🔹 Federal Competition and Consumer Protection Commission (FCCPC)

Oversees digital lending, investigates complaints, and ensures consumer protection.

3️⃣ Key Legal Principles & Court Precedents

🔸 Enforceability of Loan Agreements

  • Balogun v. Labiran (1988): Held that oral loan agreements are unenforceable unless they meet the writing requirement under the law.

🔸 Excessive Interest Rates

  • Nigeria Merchant Bank v. Akinloye (1995): Interest of 48% p.a. ruled excessive and voided by the court for being unconscionable.

🔸 Operating Without a License

  • State v. Okoli (2004): A lender was successfully prosecuted for unlicensed operations, reinforcing the necessity of state-issued licenses.

🔸 Digital Lending and Consumer Protection

  • FCCPC v. Soko Lending (2022): A court ordered the shutdown of a digital loan app due to privacy violations and borrower harassment.


4️⃣ Common Challenges in Nigeria’s Lending Sector

Challenge

Details

Unlicensed Digital Lenders

Many fintech apps operate without state or FCCPC authorization.

High Interest Rates

Rates remain excessive despite legal interventions.

Limited Consumer Awareness

Borrowers are often unaware of their rights under applicable laws.

Weak Enforcement

Regulatory agencies struggle with capacity and monitoring tech platforms.


✅ Compliance Requirements for Money Lenders in Nigeria

Requirement

Details

State Licensing

Must be obtained annually from the appropriate state authority.

Loan Documentation

Written agreements, including digital consent for online platforms.

FCCPC Approval (for Digital Lenders)

Mandatory for mobile lending platforms targeting the Nigerian public.

Data Protection Compliance

Platforms must not harass or defame customers or breach privacy.


🧾 Conclusion

The legal landscape for money lending in Nigeria is evolving. To operate legally, all traditional and digital lenders must comply with licensing requirements and consumer protection regulations. Borrowers, on the other hand, must understand their rights, particularly when dealing with unlicensed or unscrupulous lenders.

At O.I.D. Legal Consult, we advise financial institutions, fintech startups, and lending platforms on regulatory compliance, licensing, and litigation risks in Nigeria’s lending market.

📩 Need legal support for money lending operations? Email: oidlegalconsult@outlook.com 📞 Tel/WhatsApp: +2348168868476


📚 References

  • Money Lenders Act (1958)

  • Lagos State Money Lenders Law (2009)

  • BOFIA (2020)

  • Central Bank Guidelines & Circular No. 33 (2014)

  • FCCPC v. Soko Lending (2022)

  • Balogun v. Labiran (1988)

  • Nigeria Merchant Bank v. Akinloye (1995)

  • State v. Okoli (2004)

 
 
 
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