Most loan disputes in Nigeria are not, at bottom, disputes about whether the money was owed. They are disputes about whether the security taken for it was properly created and perfected. Nigerian case law over three decades is, in large part, a record of lenders learning this the hard way.
A lender can have an airtight facility agreement and still walk away from a default with nothing, because the collateral behind the loan was never made legally enforceable. Getting the security right — and keeping it right for the life of the facility — is consistently cheaper than litigating a defective mortgage years later.
01 — Asset ClassesKnow What Kind of Collateral You Are Actually Taking
Nigerian law does not treat "collateral" as a single concept. Land, company assets, movable property, and personal guarantees are each perfected through entirely different regimes, and a lender who applies the wrong process to the wrong asset class will find, at the point of enforcement, that the security never existed in law.
- Land and real property are governed by the Land Use Act, and every mortgage over a statutory or customary right of occupancy requires the consent of the relevant Governor
- Company assets, whether fixed or floating charges, must be registered with the Corporate Affairs Commission (CAC) within the statutory window under the Companies and Allied Matters Act (CAMA)
- Movable assets — inventory, equipment, receivables — fall under the Secured Transactions in Movable Assets Act 2017, and are perfected by registration on the National Collateral Registry
- Ships, aircraft, trademarks, and patents each have their own dedicated registries, and a security interest over them is not effective against third parties until registered there
A facility that mixes several of these asset types in one collateral package needs each component perfected through its own regime. Treating them as a single administrative step is one of the most common — and most expensive — mistakes lenders make.
02 — Governor's ConsentConsent Is Not a Formality
No area of Nigerian secured lending has generated more litigation than the requirement of Governor's consent under Sections 22 and 26 of the Land Use Act. In the landmark case of Savannah Bank v Ajilo, the Supreme Court held that a mortgage over land created without the Governor's consent is void. That decision, for years, gave defaulting borrowers a ready-made technical defence: raise the consent issue late in litigation, and the lender's entire security could collapse regardless of the merits of the underlying debt.
The courts have since softened the harshest edge of that rule. In Awojugbagbe Light Industries Ltd v Chinukwe, the Supreme Court held that a mortgage executed without prior consent is not automatically void but "inchoate" — it remains capable of being perfected if consent is obtained before the transaction proceeds to completion. Ugochukwu v Cooperative & Commerce Bank and later decisions, including Abdullahi v Adetutu, have continued to refine this position, treating consent, stamping, and registration as sequential stages of perfection rather than a single precondition that must exist before the deed is even signed.
Cases Referenced
Savannah Bank v Ajilo — a mortgage created without Governor's consent under the Land Use Act is void.
Awojugbagbe Light Industries Ltd v Chinukwe — consent obtained after execution but before completion renders the mortgage inchoate, not void.
Ugochukwu v Cooperative & Commerce Bank — treats consent, stamping, and registration as sequential stages of perfection.
Abdullahi v Adetutu — reaffirms the staged approach to perfection of land-based security.
Ajao v Ademola — a party lending at interest and taking collateral for sale on default must be licensed as a moneylender.
The practical lesson is not that consent can be safely skipped. It is that a lender taking land as security should treat Governor's consent as a tracked, time-bound obligation from the moment the facility is disbursed — not a box to revisit only if the borrower defaults. Lenders who wait until enforcement to discover that consent was never obtained are relying entirely on the more forgiving line of authority, which is not guaranteed to survive a determined challenge on the specific facts of the case.
03 — TimingPerfect the Security Before You Need It, Not After
A charge unregistered at the CAC within the statutory period is void against the liquidator and other creditors, even if it is perfectly valid between lender and borrower. A movable asset security interest not entered on the National Collateral Registry can be defeated by a later-registered competing interest, regardless of which lender advanced funds first.
This is why the perfection checklist should run in parallel with disbursement, not after it. Practically, this means:
- Confirming Governor's consent is applied for immediately upon execution of the mortgage deed, with disbursement conditions tied to progress on the consent application where the loan value justifies it
- Filing CAC registration for company charges within the statutory window, with the filing receipt held as a condition precedent document in the loan file
- Registering movable asset security on the National Collateral Registry before or contemporaneously with disbursement, particularly where the same asset could plausibly be offered to another lender
- Confirming that any security trustee or agent structure used for syndicated facilities is validly appointed and that the underlying security interests are perfected in the trustee's name, not left informally with the arranging bank
04 — Lender StandingUnderstand Who Can Lawfully Hold the Collateral
A lender's right to sell or otherwise realise collateral on default depends on the lender's own legal standing, not just the borrower's paperwork. Nigerian courts have consistently scrutinised whether a party extending credit and taking security is, in fact, operating as a licensed moneylender where the transaction falls outside conventional banking. In Ajao v Ademola, the courts held that a party who lends money at interest and takes collateral for sale on default is engaging in moneylending, and is required to be licensed as such — a finding that can expose an unlicensed lender to the loss of its right to enforce security or even recover interest, regardless of how well the underlying documents were drafted.
For institutional lenders this is rarely an issue, but it becomes highly relevant in private lending arrangements, related-party facilities, and informal credit extended by non-bank entities — all of which are increasingly common in Nigeria's SME and fintech lending space.
05 — EnforcementBuild the Enforcement Pathway Into the Documentation
A security interest that is validly created and properly perfected survives the borrower's insolvency, and a secured creditor's right to enforce is generally unaffected by liquidation or receivership proceedings — provided the paper trail can prove perfection at every stage. That proof needs to exist before a dispute arises, not be assembled defensively once litigation has started. Loan documentation should specify, with precision, what constitutes default, what powers of sale or appointment of receiver arise on default, and how those powers interact with the specific perfection regime governing each class of collateral in the security package.
06 — The PatternThe Underlying Pattern
Nearly every major Nigerian case on defective security — from Savannah Bank v Ajilo through Awojugbagbe to the more recent refinements of the consent doctrine — turns on the same underlying fact pattern: a lender that treated collateral as fully secured the moment documents were signed, when in law the security was still incomplete. Getting a loan structured correctly at the outset, and keeping perfection current throughout the life of the facility, is consistently cheaper than litigating a defective mortgage years later.
Graywhite Attorneys advises lenders and borrowers on structuring, documenting, and perfecting security over land, company assets, and movable property in Nigerian loan transactions.
