The Central Bank of Nigeria has introduced new rules requiring lenders and borrowers to settle loan disputes through a mediation panel before filing lawsuits. The apex bank issued a circular on Tuesday calling on stakeholders to comment on draft guidelines for the Mediation and Dispute Resolution Panel under the Secured Transactions framework.
The move signals a shift in how Nigeria handles banking conflicts. Rather than rushing to courts, parties will now have to exhaust the mediation process first. This is meant to reduce the backlog of cases in Nigeria's courts and speed up resolution of commercial disagreements between financial institutions and their clients.
The CBN believes the new system will benefit all parties involved in lending relationships. Banks get faster resolution without lengthy court battles. Borrowers avoid expensive litigation costs and can return to normal operations more quickly. The courts themselves will face less pressure from commercial cases that could otherwise drag on for years.
The draft guidelines spell out how the mediation panel will work. Both creditors and borrowers must agree to submit their disputes to trained mediators before either party can approach the courts. The panel will have set timelines for resolving cases, ensuring the process does not become another avenue for delay.
The CBN's decision reflects growing recognition that Nigeria's court system struggles with the volume of commercial cases. Banks regularly complain about how long it takes to recover money from defaulting borrowers. Borrowers, meanwhile, often feel cornered when banks move immediately to court without exploring other options.
Stakeholders now have a window to review the draft guidelines and send feedback to the CBN. The apex bank will use this input to refine the rules before they become final. Once approved, both financial institutions and customers will be legally bound to use the mediation process.
The Secured Transactions framework itself has been a focus area for the CBN in recent years. It governs how lenders can claim assets when borrowers default on loans. Adding a mediation requirement is meant to make this framework work better for everyone.
Industry observers expect resistance from some lawyers who profit from lengthy court cases. However, financial institutions have already called for faster dispute resolution methods. The banking sector argues that delays in recovering bad loans make it harder for them to lend money to other customers.
The CBN will announce the final implementation date once stakeholders submit their comments and the bank reviews them. Banks and lending companies should begin preparing their staff to participate in mediation sessions when the new rules take effect. This marks a deliberate attempt by Nigeria's financial regulator to modernize how commercial disputes are handled.
