CBN Plans Mandatory Mediation Step Before Loan Disputes Go to Court

The Central Bank of Nigeria is seeking to reshape how lending disputes are handled by introducing a requirement for creditors and borrowers to first resolve issues through a mediation panel before heading to court.

The move comes through a circular inviting stakeholder input on draft guidelines for establishing a Mediation and Dispute Resolution Panel under the Secured Transactions in Movable Assets framework.

Signed by P. I. Oluikpe, Acting Director of the Development Finance Advisory Department, the circular signals a clear shift away from court-driven dispute settlement toward a more structured alternative resolution process.

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Under the proposed arrangement, the panel would act as the primary channel for resolving disputes arising from secured lending transactions, particularly those backed by movable assets.

The draft guidelines specify that the panel will exercise first-instance authority over such disputes, effectively making mediation a compulsory first step before any litigation can be initiated.

It is also empowered to interpret applicable laws, rules, and regulatory provisions governing secured transactions, including relevant international frameworks.

Participation in the panel’s process will not be optional, as both lenders and borrowers will be required to formally recognise and submit to its authority, typically through clauses embedded in loan agreements.

Although the Secured Transactions in Movable Assets Act, 2017 already provides for such a mechanism, the current initiative focuses on putting the framework into operation by clearly defining procedures, responsibilities, and enforcement measures.

A major highlight of the proposal is its defined timeline. The panel is expected to conclude cases within 90 days from the first hearing, ensuring quicker resolution compared to traditional court processes.

Decisions issued by the panel will carry legal weight, with enforcement treated in the same manner as court judgments. Parties must comply within 30 days, failing which such rulings can be registered at the Federal High Court for enforcement.

The framework also accommodates interim and partial rulings ahead of final decisions. Where disputing parties reach a settlement, such agreements can be adopted by the panel as binding final awards.

Appeal options remain available but are restricted to issues involving law or mixed law and fact. These appeals must first be reviewed by a High Court before progressing to the Court of Appeal.

To qualify for consideration, disputes must meet specific conditions, including the existence of a valid security agreement, a mediation clause recognising the panel, and proof that the collateral has been registered with the National Collateral Registry.

In addition, parties must demonstrate that they made genuine efforts to resolve the dispute amicably before approaching the panel, reinforcing the emphasis on non-adversarial processes.

The central bank believes the initiative will strengthen confidence in secured lending, improve access to credit, and provide a more efficient and cost-effective dispute resolution system.

Stakeholders have until October 9, 2026, to submit feedback on the proposed guidelines.