Nigeria | What is Most Effective Debt Collection Mechanism in Nigeria?(1)
Contributed by CJP Ogugbara, CJP Ogugbara & Co (Sui Generis Avocats), Nigeria.
The answer is litigation.
The most effective way of achieving debt collection is by civil litigation through a civil court with the jurisdictional competence to handle the suit in terms of subject matter and composition. In the adjudicatory process, the foremost step is for the creditor to engage the services of a Law Firm; whether outsourced counsel or in-house retained law firm. In either case, the creditor would instruct the Law firm to formally write a demand letter to the debtor demanding for the payment of the indebted sum within a specific time; usually 7 days. In Nigeria, writing a letter of demand is compulsory and usually considered the precondition for demanding for debts. Meanwhile, in the case of outsourced law firm, the creditor would have discussed the fees of the counsel which could be contingent, quantum meriut or percentage of recovered sum. The modalities of chargeable fees must be agreed upon by the creditor and the law firm. Thereafter the fees are agreed, there would assemblage of proforma, invoices, receipts, correspondences, Bank Statements, Bank Accounts and all other documentary evidences regarding the transaction between the creditor and the debtor. It is also during this window that materials would be sieved to isolate irrelevant facts or incorporate vital facts. Moreso, at this point, the transaction and subject matter would be identified as well as its justiciability or otherwise would also be tested. At this stage, the territorial and substantive jurisdictions on the subject matter would also be decided. It is always suggested that the invoices are issued in piecemeals to allow severance and divisibility if need be in the suits.
In the event the debtor denies indebtedness to the creditor, or did not deny but refused to pay after the due date stated in the demand letter, then the cause of action for a claim on the indebted sum against the debtor had arisen. Where the creditor is not in Nigeria, has no correspondent, staff or even a significant presence of any kind in Nigeria, he would be advised to opt for donation of power of attorney to the Law Firm or a representative of the Law firm. It would be recalled that the relationship is that of utmost good faith and fiduciary, hence it is expected that the Law Firm acts accordingly. With the Power of Attorney donated the creditor’s attorney, would take further step to ensure proper perfection of the document. This simply means to register the Deed and Stamp Duty. Thereafter, the suit is filed in the name of the creditor through his Lawful Attorney. The suit is filed by writ of summons alongside the Summary Judgment Application or Undefended List procedure depending on the Jurisdiction where the suit is to be filed; of course, it is the place of business/resident of the debtor or the location of the transaction. All thing being equal, the suit is averagely expected to last for a period of 6 – 9 Months after commencement. However, if the suit is contested by the Debtor, he would be allowed to file Defense, and if there is manifest complexity on the facts of the case, it is expected to last for between 1 year 6 Months or a such more period expectedly not exceeding 3 years.
Now it must be noted that the willingness of the Debtor to contest the case is dependent on the way and manner the case was built from the beginning. Where it is noticed that all available documents and proofs in regards to the transaction has been made bare, it would be almost impossible for the Debtor/Defendant to raise any tangible Defense. Infact the Judge or Magistrate sitting over the matter would take a stand from inception, and such influence can affect the positively in speedy dispensation with the matter. Consequently, in order to have a good standing point, it is advised that the creditor during the course of the negotiation of the trade, should make efforts to gather and garner as much information as possible. This information may not be limited to details of the debtor/buyer’s bank Information, phone numbers, emails, addresses of businesses and homes in Nigeria. If time permits, to engage experts for due diligence and risk assessments before concluding the transaction. It is suggested that such creditor who have many Nigerian trade partners should retain the services of Law Firms that can double as local correspondent and retained law firms for such purposes. As regards the exchange rate, the creditor is advised to transact and issue receipts/invoices on more stable currencies that have global acceptance such as dollars and pounds. Hence with such move, the debt becomes an investment of some sort as long as they remained unpaid, because the sum value would continuously appreciate even though the amount remains the same.
Contributor: CJP Ogugbara
Agency/Firm: CJP Ogugbara & Co (Sui Generis Avocats)(English)
Position/Title: Founding Partner
For more posts contributed by CJP Ogugbara and CJP Ogugbara & Co (Sui Generis Avocats), please click here.
The Q&A Global is a special column run by CJO Global, and serves as a knowledge-sharing platform to facilitate peer learning and networking, and to provide the international business community with a global landscape of this industry.
This post is a contribution from CJP Ogugbara & Co (Sui Generis Avocats). Established in 2014 as a Partnership Firm in Nigeria, CJP Ogugbara & Co has been working along and engaging in dispute management, litigation and arbitration, commercial practice: real estate and investment advisory, tax practice and energy consultancy. Apart from the core practice areas, they also facilitate and extend practice to the development of clients’ businesses and corporate interests, especially as they apply to the Nigerian economy and investment circle.