PAYDAY (MONEY LENDING) REGULATIONS IN NIGERIA

PAYDAY (MONEY LENDING) REGULATIONS IN NIGERIA

The law on money-lending was enacted in Nigeria to curb the exploitation of borrowers in Nigeria.

Money Lending also known as financing is the service of lending money at interest rates or lending a sum of money in consideration of large sum of money being repaid. Money Lending is regulated by the Money Lending Law of the various states in Nigeria. It can be granted to an Individual or a corporate body.

For an individual or company to become a legitimate money lender, the individual or company must obtain the Money Lender License to practice in Nigeria. This is defined in Section 4 of the Money Lenders Law Chapter 7 Laws of Lagos State which provides “that a person who lends money at interest or who lends a sum of money in consideration of a larger sum being repaid shall be presumed to be a money lender until contrary is proven”.

In Nigeria, transactions are regulated by separate legislation. Prior to 1990, money lending was regulated concurrently by the Federal Government of Nigeria and by the various State Governments through the Moneylenders Act and the Moneylenders Laws of the various States respectively. However, the Moneylenders Act has since been repealed leaving the regulation of money lending to the Moneylenders Laws of the various States of Nigeria. Basically, the business of Money Lending is regulated by the Money Lending Law of the various States in Nigeria. `

Money lending under Section 4 of the MONEY LENDERS LAW Chapter M7 Laws of Lagos State provides that; “a person who lends money at interest or who lends a sum of money in consideration of a larger sum of money being repaid shall be presumed to be a money lender until the contrary is proved”.

Section 2 of the Money Lenders Act defines a money lender as “includes every person whose business is that of money lending or who carries on or advertises or announces himself or holds himself out in any way as carrying on that business whether or not that person also possesses or earns property or money derived from sources other than the lending of money and whether or not that person carries on the business a principal or as an agent.

The said section however exempts certain categories of people from money lending activities.

They include;

 any cooperative registered under the cooperative societies law

 Anybody corporate incorporated or empowered by special law to lend money in

accordance with the law.

 

Steps and Procedure for applying for a Money Lending License

Make an application to the Chief Magistrate within the jurisdiction where the business will be carried on, on the applicants letter head with the Company’s Seal attached.

Attach to the letter the following supporting documents to the written application:

 A cover letter with the Company seal affixed to it

 Office address of the Individual applicant or Company

 Certified True Copy of the CAC 2 (Authorized Share Capital) of the Company.

The authorized share capital must be in accordance with the CAC requirement.

 Certified True Copy of the CAC 7 (Particulars of Directors)

 Memorandum and Article of Association of the Company. The objects in the

company’s memorandum must include financial service or money lending

business.

 Certificate of Incorporation of the Company

 Tax Clearance for the individual applicant or Corporate Body, if it is a company

newly incorporated, then provide evidence that the company is a registered tax

payer

 Police Clearance for the Individual applicant or Company

 Evidence of maintenance of a current account with a licensed Bank

 

Upon application to the Magistrate, the applicant will be issued a letter and Forms B and C.

The applicant is to make payment of the prescribed application fee to the Office of the

Magistrate.

After obtaining the necessary court documents, the applicant is to make a formal application to

the Ministry of Home Affairs and Tourism with the following documents:

 An application letter to the Ministry

 Money Lending Ordinance (Form B) 1938, issued from the Magistrate Court

 A duly completed Magistrate Form C

 Police report from the Commissioner of Police Showing fingerprints of the Directors

of the Company or Individual Applicant

 3 years Income Tax Clearance Certificate for each individual applicant or Directors of the Company

 PAYE (Pay as You Earn Certificate), Tax Clearance of at least 2 Directors or

Evidence of Company Taxes

 Certificate of Incorporation of the Company

 Evidence of payment of application fee into the Lagos State Account.

 Evidence of maintenance of a current bank account with a reputable bank

The Applicant is to make a payment of the official fee of N50,000 into the Lagos State Account.

The applicant will be required to make the payment of N10, 000 for the Application Form with the Receipt evidencing payment.

 The next step is to obtain an invoice from the Ministry of Affairs and Tourism Revenue Collection Department for the payment of N50, 000 Money Lenders Fee.

 Upon obtaining the form, complete the form and pay into the Department’s Account.

 Submit the application for Regularization Form, attaching the following documents.

 The Final stage the visitation and physical inspection of the intended office by

government officials. Upon visitation, if the company in question is already operating in the money lending activities, the books will be inspected in addition to the office.

 If the company complies with the statutory requirements and upon the government

officials’ satisfaction, the applicant will be issued with the Money Lending License

Certificate.

In conclusion, an individual or company will only be a legitimate money lender, if the Money Lender License to practice in Nigeria is obtained. One of the benefits of being a licensed money lender is that a money lender can exercise its right to recover a debt from a defaulting borrower by instituting an action in Court to recover the principal loan and accrued interest.

BY: RESOLUTION LAW FIRM.

info@resolutionlawng.com

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