A REVIEW OF THE MONEY LENDERS LAW LAGOS
The moneylenders Law, (Cap M7, Laws of Lagos State) was established to guide the conduct
of moneylending and licensing of moneylenders within Lagos State.
Section 5 (1) prescribes that every moneylender shall take out a “moneylender’s licence”
annually in respect of every address which he carries on business.
The Law further states that a money lender shall not transfer his business to premises other
than those specified in his license, until he has notified the magistrate of the district of the
proposed transfer.
By virtue of Section 13, No contract entered into by a borrower or his agent for the repayment
or security of money lent to borrower or his agent or for payment of interest on money lent or
for the security thereof by the borrower or any of his agents unless a memorandum in writing
be made and signed by parties to the contracts or their respective agent. If it be a loan to a firm,
then the partner or agent in the firm, and unless a copy of such memorandum be delivered or
sent by post to the borrower or his agent within seven days of it’s been certified. The contract
or security however, shall not be enforceable if it is proved that the memorandum was not
signed by the Borrower before the money was lent or security given.
Section 13 further states that where a security is given to secure an immediate loan and
subsequent loans, the security shall be enforceable in respect of any such subsequent loan(s)
insofar as the note or memo of the subsequent loan is signed and delivered to the borrower
before money is lent. The memorandum shall contain all the details of the contract, and must
show separately and distinctly, the following:
● Date of loan
● Name of bank and branch on which the cheque, (by means the money was lent)
was drawn and the number of the cheque
● Amount of principal loan
● Rate of interest percent per annum, or where interest per annum is not indicated,
amount of such interest
{note that: All dates and numbers shall be written in English numerals regardless of any other
form.}
Section 14 of the law states that every loan must be made by cheque, and any therefore, any
contract for repayment or securing of money borrowed shall be unenforceable, insofar as the
money lent was not drawn by cheque. It also prohibits the lender from making any arrangement
whereby the borrower is prevented from obtaining the full amount of the cheque drawn.
The respective interest rates which may be charged on loans were stated as well as the Penalty
for charging unauthorised interest(i.e N600). Prosecution can only be done with AG’s consent.
The law stretched this provision further by proscribing that Compound interest was also
prohibited.
The Moneylenders Law Lagos also states that no agent or canvasser shall be employed for the
purpose of inviting any person to borrow money from any such moneylender. Furthermore, no
person shall knowingly advertise himself as a moneylender inviting the public to borrow money
from him except such advert is licensed under the law and exhibited at an authorised address.
Where any debt in respect of money lent by a moneylender or in respect of interest on any such
debt is assigned to any assignee, the assignor shall before the assignment is made:
(a) Give notice in writing that the debt, agreement or security is affected by the operation
of this law
(b) Supply to the assignee all information necessary to enable him comply with the
provisions of this Law, relating to the obligation to supply information to the state of
loans and copies of documents related thereto.
(NOTE: any person who contravenes these provisions shall be liable to indemnify any person
so prejudiced and shall be liable to 6months and 200 fine)
Section 25 further states that this law applies to both the original borrowers of the money and
any subsequent assignees. It also states that any agreement /security taken by a moneylender
in respect of money lent by him after the commencement of this law shall be valid in favour of
any bonafide assignee or holder for value without notice of any defect and of any person so
deriving title under him. And any payment or transfer of property or money made bona fide by
any person acting in fiduciary duty or otherwise, on the faith of validity of the agreement shall
in favour of that person be valid as it would have been if the agreement or security was valid.
Section 26 (3) empowers the court to determine any contract and order repayment of
outstanding in favour of a plaintiff where borrower is in default under a contract for loan
whether the amount outstanding is due or not. While Section 26(4), states that any court in
which proceedings might be taken for recovery of money lent shall have power to entertain any
application under this Law by the borrower or surety or other liable person, notwithstanding
any provision in the agreement to the contrary or that the time for repayment of the loan or any
instalment is not yet due.
Any moneylender who through false statements/representation, made by himself or any of his
agents, induces any person to borrow shall be liable on conviction to six months imprisonment
or a fine of 200 naira.
CALCULATION OF INTEREST WHERE INTEREST CHARGED
ON LOAN IS NOT RATE
The several amounts taken to be outstanding by way of principal during the several periods
shall be multiplied by the number of calendar months during which those amounts are taken to
be respectively outstanding, and there shall be ascertained the aggregate amount of the sum so
produced. The total amount of the interest shall be divided by one-twelfth part of the aggregate
amount, and the quotient multiplied by one hundred, shall be taken to be the rate of interest per
annum.
MONEY LENDERS REGULATION
Finally, it is important to cite Section 6 of this regulation, which states that the Registry for
registration of moneylenders’ license is established at the Magistrate court and the Magistrate
of the court is hereby appointed the Registrar of Moneylenders.