The Nigerian banking industry has raised alarm over the sluggish judicial process frustrating the recovery of over ₦1.5 trillion in bad loans, with financial experts warning that the inefficiencies are stalling credit access, suppressing private sector growth, and weakening investor confidence in the economy.
This concern was at the heart of discussions at the 23rd National Seminar on Banking and Allied Matters for Judges, which held in Abuja. The seminar, organised by the Chartered Institute of Bankers of Nigeria (CIBN) in collaboration with the National Judicial Institute (NJI), brought together high-ranking judges, regulators, and stakeholders in Nigeria’s financial ecosystem.
Chairman of the Body of Banks’ CEOs and Group Managing Director of United Bank for Africa (UBA), Dr. Oliver Alawuba, said that Nigeria’s financial sector cannot thrive without a “predictable and responsive legal framework.” He stressed that judicial delays, overlapping court jurisdictions, and poor enforcement of financial contracts have compounded lending risks, especially for small and medium-sized enterprises (SMEs).
“No economy can flourish without the enabling guardrails of justice. From credit systems to contract enforcement and financial crime prosecution, banks depend daily on the fairness and speed of our courts,” he stated.
Recent reports from the Central Bank of Nigeria (CBN) show that non-performing loans (NPLs) have soared to ₦1.57 trillion as of Q1 2025. Many of these bad loans, bankers claim, remain tied up in protracted litigation processes that make it difficult for banks to recover debts and reinvest in the economy.
Alawuba pointed to global best practices from countries like Rwanda, Singapore, and the UK, where specialised financial courts and digital case management systems have reduced resolution timelines, increased investor trust, and improved the overall ease of doing business.
In Rwanda, for instance, commercial courts and real-time digital tracking of legal proceedings have been instrumental in resolving banking disputes swiftly. Singapore’s Financial Disputes Resolution Scheme (FDRS), Alawuba noted, offers a benchmark for Nigeria to replicate, as it has significantly enhanced the efficiency of justice delivery in financial matters.
He recommended the establishment of specialised financial courts, digitisation of court procedures, and a harmonised legal framework for financial dispute resolution. According to him, such reforms will not only boost credit confidence but also attract greater foreign direct investment.
“There must be institutional trust between the judiciary and the banking sector. Without an efficient judiciary, banks will struggle to lend confidently. And without a strong financial system, even the judiciary’s infrastructure cannot be sustainably financed,” he added.
The CIBN President, Prof. Pius Deji Olanrewaju, echoed these concerns, warning that legal uncertainty undermines public confidence and chokes capital inflows into the economy.
“Trust is the lifeblood of banking, and security is its bedrock. Every financial transaction, from deposits to loans, hinges on the assurance that rights will be upheld and obligations enforced,” he said.
Olanrewaju called for judicial capacity-building in emerging fields such as digital banking, financial technology, and cybercrime to ensure the judiciary is not left behind in the face of fintech disruptions.
He also raised alarm over frequent abuse of garnishee and post-no-debit (PND) orders by security agencies and magistrate courts, which he said disrupt banking operations and violate established legal precedents.
While urging stronger collaboration between banks and the judiciary, he disclosed that CIBN resolved 49 out of 74 financial disputes in 2024 through alternative dispute resolution mechanisms, recovering over ₦538.5 million without court litigation.
To curb the mounting financial disputes and ease pressure on commercial courts, stakeholders are advocating for:
Creation of dedicated financial tribunals.
Fast-tracking digitisation of court processes.
Training of judges on fintech and cyber-related financial cases.
Review of legal provisions that allow abuse of garnishee and PND orders.
Analysts believe that if Nigeria fails to act swiftly, the rising NPLs and weak debt recovery systems will continue to deter lending to SMEs, derail job creation efforts, and ultimately erode public trust in the banking system.
With over 37 million SMEs contributing nearly 50% to Nigeria’s GDP, access to credit remains critical. Yet, judicial delays in loan recovery are leaving banks more cautious, reducing their willingness to extend fresh credit.
As Nigeria aims to reposition itself as a hub for digital finance and foreign investment, experts insist that judicial reform is no longer optional—but essential.