Recovering Non-Performing Loans in Nigeria: A Playbook for Lenders

Non-performing loans tie up capital, reduce lending capacity and weigh on profitability. Nigerian banks, microfinance institutions and digital lenders all carry them. The institutions that recover the most do not rely on persistence alone. They follow a structured process. This is the playbook we use at Tenaza Asset Recovery & Intelligence.

1. Segment the portfolio

Not every account needs the same treatment. We segment by balance, age, security, borrower type and traceability. Some accounts will settle after a professional conversation; others need legal action; others require tracing before anything else can happen.

2. Verify the paper

Recovery depends on documentation: loan agreements, security documents, guarantees, statements and correspondence. Gaps should be identified and closed early, because they decide what legal options exist.

3. Trace the debtor and the assets

Debtors move, change numbers and transfer assets. Our proprietary AI model links records across registries, courts, property and digital sources to locate debtors and identify assets that can be attached, across Nigeria and our correspondent network in more than 40 countries.

4. Engage professionally

Most recoveries are negotiated. Clear demand letters, realistic restructuring options and firm timelines produce settlements. Respectful, lawful conduct protects the lender's reputation and complies with consumer protection rules.

5. Escalate when needed

Where negotiation fails, the right legal route depends on the security and the evidence: enforcement of security, judgment and execution, or insolvency proceedings. Asset intelligence gathered earlier makes enforcement far more effective.

6. Measure and report

Lenders should see recovery rates, costs and timelines by segment, so they can price risk better and improve origination. As a chartered accountant and fraud examiner, I insist that every recovery is documented to audit standard.

Settlement options that work

• Restructuring: longer tenor or lower instalments for borrowers with income but temporary difficulties.
• Discounted settlement: a lump sum below the full balance, approved within a clear policy.
• Asset sale by agreement: the borrower sells pledged or other assets with proceeds paid to the lender.
• Debt-for-asset swap: the lender takes ownership of an asset in settlement, where it can realise value.

Each option should be assessed on net present value against the realistic alternative, including legal costs and time.

The legal and regulatory landscape

Nigerian lenders can enforce security through the courts and, for eligible assets, through the Asset Management Corporation of Nigeria framework. The Central Bank of Nigeria's Global Standing Instruction allows participating banks to recover from a defaulting borrower's accounts at other banks for qualifying loans. Credit bureau reporting creates incentives to repay. Recovery agents must also follow consumer protection rules, including those enforced by the FCCPC on digital lending conduct.

Prevention is the best recovery

Lessons from recoveries should flow back to credit teams: which industries, products or documentation gaps produced losses? Better onboarding, stronger security documentation and early warning monitoring reduce future non-performing loans more than any recovery strategy.

A leader's view: treat recovery as a business function

Many lenders treat recovery as an afterthought: a function that receives problem accounts and is judged on what it brings back. Leading institutions treat it as a core business function, with strategy, technology, data and talent. The difference shows in results. Structured recovery programmes recover more, faster, with lower costs and fewer disputes.

Leaders should set clear policies: when accounts move to recovery, who can approve settlements and at what discounts, when to engage external agents and when to litigate. They should measure recovery rates by segment, cost of recovery, time to resolution and complaint levels. They should also ensure that recovery practices respect borrowers and comply with consumer protection rules; aggressive tactics damage reputation and attract regulatory penalties.

Choosing external partners carefully matters too. A good recovery partner brings investigation capability, legal expertise, technology and a network for tracing assets across borders. They report transparently and follow the lender's standards. At Tenaza Asset Recovery & Intelligence, our work combines data-driven tracing with field investigation and legal process, because recovery succeeds when each step is done properly and in the right order.

The result

A structured process turns a bad-debt portfolio from a write-off into a recoverable asset. We grip. We hold. We recover.

Common questions

How do Nigerian banks recover bad loans?

Through negotiation and restructuring, enforcement of security, the Global Standing Instruction for eligible loans, AMCON for qualifying assets, credit bureau reporting and court action.

What is the Global Standing Instruction?

A Central Bank of Nigeria framework that lets participating banks recover qualifying defaulted loans from the borrower's accounts at other banks.