To recover debt from a company and individual in Nigeria involves various legal options. It is important to state that there is a limitation period to which a debt can be recovered in Nigeria. The limitation period for debt recovery that arose from a simple contract is six (6) years excluding the year the contract was entered into and executed. So it is, therefore, advisable to institute an action for debt recovery timeously before it becomes statute-barred when the 6 years elapses as provided under Section 21(1) (a) of the Limitation of Action Law.

The process involved in recovering debt from a company in Nigeria is quite straightforward. Where a company has defaulted in paying back a debt owed, there are lawful procedures that can be invoked against such a company to recover the debt owed without violating the rights of parties in issue. But before proceeding with any legal actions, there are preliminary lawful actions that can be taken against such a debtor.

Some of the steps and strategies to recover debt from a company in Nigeria will be discussed briefly below.

  • The first preliminary step to recover debt from a company is simply to have a discussion with the company or its representatives. Sometimes putting a firm call to demand payment of the debt owed is all that would be required to recover the debt from the company.
  • Letter of Reminder: Secondly, sending written Letter(s) of Reminder to the company at periodic intervals, informing them of a pending legal action can yield a positive debt recovery. More often than not companies upon receipt of letters of reminder swiftly pay their debts to avoid tainting their reputation with legal actions. The letters of demand and reminder can be drafted by the party being owed or the service of a legal practitioner can be employed.
  • Mediation: This is also a preliminary way of involving a third party in the process of recovering debt from a company in Nigeria. This is achieved by employing the service of a professional mediator to help the parties reach an amicable settlement. 
  • Arbitration: This proceeding can be done privately without resorting to court actions. Parties must submit voluntarily to it and the arbitrator(s) make a binding decision on the debt recovery. This binding decision can also be enforced in court where the need arises. For an arbitration to take place, both the creditors and debtors must voluntarily agree to an arbitration or the arbitration clause must be included in the loan agreement or any other agreement resulting into the debt.
  • Letter of Demand: One can also recover a debt by employing the service of a legal practitioner to write a final letter of demand to the debtor, warning about the consequence that will arise if payment of the debt is not made within a stipulated time. This letter would contain and confirm the exact money being owed, a clear timeframe for the company to pay the debt (usually 7-14 days), the consequence of failure to pay the debt owed, which is usually a legal action.
  • A written Letter of Demand to a debtor company to recover a debt owed shows a level of seriousness about the debt recovery and also serves as a pre-action notice for a debt recovery suit in court. Where the Letter of Demand has been delivered to the company, the debtor company may pay up the debt owed to avoid court actions or negotiate a debt settlement plan that will be beneficial to both the creditor and the debtor.
  • Instituting a Legal Action in Court: instituting an action in court for debt recovery is the final strategy to undertake where a debtor fails to fulfil debt owed after a Letter of Demand has been issued. Where the debt owed arises from a service contract or loan agreement, legal action can be instituted in Court. The court has the power to hear and determine an action for debt recovery and enforce payment on the debtor. The appropriate court to institute a legal action depends on the total amount owed. By and large, a debt recovery action may be instituted in Lagos State or most other parts of Nigeria through the Magistrate Court, the State High Court or the Federal High Court.
  • Where a debtor has no defence as to the debt owed, Order 2 of the Federal High Court Rules provides that the party owed (Claimant) may apply summarily to the court for the issuance of a writ of summons to recover the liquidated sum and such application will be accompanied with an affidavit stating the ground upon which the claim is based and that the debtor (defendant) has no defence on the merit to the claim. The Court would then enter the claim in the undefended list if satisfied that the defendant has no defence to the claim levied against it.
  • Recovering Debt from an Insolvent Company: to recover debt from an insolvent company, a Letter of Demand will be issued to the Company and its directors demanding full liquidation of the debt within 7 days of receipt of the demand notice failing which action will be instituted against the company in court and its directors to recover the debt owed. If the company still fails after 7 days to liquidate its debt, a winding up proceedings will be commenced against the company in court to recover the debt, and an application preserving properties of the company pending the determination of the suit may also be filed together with the action. Pursuant to the provisions of the Companies and Allied Matters Act 2020, a company can only be declared bankrupt or insolvent in Nigeria if it is unable to discharge a debt of a minimum of N200,000 (Two Hundred Thousand Naira) when demanded.


Debt recovery in Nigeria involves a process of making legal demands before exploring the option of instituting an action in court. Where there is any mediation or arbitration clause in an agreement between parties, then to recover debt from the debtor-party, the other party must have a recourse to the mediation and/or arbitration first before resulting to instituting an action in court.

It is also important to remember that debt recovery in Nigeria is subject to a limitation of 6 years as provided by the Limitations Act and Limitation Laws of various states in Nigeria. Where a creditor fails to recover a debt owed within six years, the court may not entertain the case anymore unless there has been a break in the chain of causation, e.g. the company has expressly admitted or paid part of the debt within the six year of limitation period.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.