Reforming Nigeria's insolvency law: a tool for promoting access to credit

This thesis examined Nigeria’s insolvency law as a tool for promoting access to credit. It reviewed relevant literature to show the method of capital formation and access to credit in Nigeria’s pre-colonial and colonial period. In the precolonial era, it showed that the indigenous credit system was unwritten; investment was in cash crops and personal labour. With the introduction of colonialism and banking systems, the indigenous credit institutions acquired some modern/innovative methods such as documentation of credit agreements, introduction of interest/high interest rates and forcible collection of debts. Colonialism also brought in its wake, legal transplantation.

A record study formed part of the thesis. It adopted the survey method, using oral tradition, interviews and questionnaires to collect data. The population consisted of those who had utilized indigenous credit in Nigeria, using Rivers State as a case study. A sample of sixty participants was drawn from small and medium sized business owners. Only thirty-three responses were retrieved and analyzed. The result showed that there were doubts as to whether the indigenous credit arrangements can raise huge capital; most credits raised were not focused on production. It also showed that until the present day, the indigenous credit system was patronized by educated persons like university employees, and that professional money lenders were creations of colonialism, while indigenous money lending predated colonialism. The result also showed that whereas fifty-four percent had not obtained credit from banks or financial institutions, forty-two percent had obtained credit from indigenous credit sources. Also fifty-one percent of those that had not obtained loans from indigenous sources claimed that it was not due to accessibility problems, but due to the extortionist tendencies of the money lenders. It also identified that the desire to meet social responsibilities and to ‘survive’ has inflamed the need to create wealth sometimes through ‘get rich quick schemes’ which in turn has affected credit and enterprise. The thesis identified mechanisms adopted by the indigenous creditors to recover debts as: community action, extended family system, the Nigerian Police and juju shrine and witchcraft. It noted the inadequacy of Nigeria’s insolvency laws and advocated reforms which it stressed would serve as a collective debt recovery tool and also afford debtors the opportunity of a fresh start. It also recommended that there should be specialized insolvency law education and the use of intermediaries to facilitate education of Nigerians as to their rights and responsibilities as it pertains to insolvency issues.