In Nigeria, a one-off loan between individuals in naira is legal if it is written down and traceable, but lending money as a regular activity requires a state licence, and digital loan apps must be registered with the FCCPC.
Who regulates credit in Nigeria
The Central Bank of Nigeria licenses banks and microfinance institutions, the Securities and Exchange Commission oversees crowdfunding, and the Federal Competition and Consumer Protection Commission protects borrowers. A one-off family loan, by contrast, simply falls under ordinary contract law.
State money lenders laws
Lending at interest on a regular basis falls under Money Lenders Laws adopted state by state. In Lagos, the licence is issued by a state ministry after a magistrate gives a character assessment, and it must be renewed every year.
The 2025 DEON regulations on digital lending
In force since July 2025, the DEON regulations require loan apps to register with the FCCPC. They ban harassment and defamation of borrowers, with fines of up to 100 million naira or 1% of turnover.
Crowdfunding: SEC rules since 2021
The Rules on Crowdfunding of January 2021 reserve fundraising for Nigerian micro, small and medium enterprises through a registered portal. An individual invests no more than 10% of net annual income; see also our feature on crowdfunding.
Ajo, esusu, adashe and isusu
Rotating savings are an old tradition: ajo and esusu among the Yoruba, adashe in the Hausa north, isusu in Igbo land. Each member contributes, then receives the pot in turn; if someone defaults, only the group can apply pressure, with no simple court remedy.
Non-interest finance and the qard hassan loan
The CBN licenses Sharia-compliant non-interest banks such as Jaiz Bank and TAJBank. Between Muslim individuals, the interest-free loan known as qard hassan remains common, especially in the north; a written agreement signed before witnesses still protects lender and borrower alike.
No single legal usury cap
Nigeria has no national usury rate comparable to the French system. The CBN policy rate serves as a benchmark for banks, but a clearly excessive private rate can be challenged in court. It is better to set a moderate rate and write it down clearly.
The diaspora and transfers from abroad
Many family loans come from relatives living in the United Kingdom, the United States or elsewhere in Europe. Funds pass through licensed transfer companies or banks; informal currency channels expose people to losses, frozen funds and suspicions of money laundering.
419 and advance-fee fraud
Advance-fee fraud is nicknamed 419, after the Criminal Code section that punishes it, supplemented by a 2006 fraud law. The fake lender demands release fees, often by international transfer, then disappears without a trace.
Reporting fraud: the EFCC and the police
The Economic and Financial Crimes Commission investigates financial scams, while the Nigeria Police National Cybercrime Centre handles online fraud under the 2015 cybercrimes law. Keep screenshots, phone numbers and receipts before filing any report.
Personal data and abusive loan apps
The 2023 data protection law, enforced by the Nigeria Data Protection Commission, governs how your contacts and photos may be used. An app that threatens to message your family or employer can be reported to this commission and to the FCCPC.
Nigerian cities: different practices
Practices vary by city: trade and technology in Lagos, the economic capital, the federal civil service in Abuja, Islamic finance in Kano, oil in Port Harcourt, large markets in Ibadan. Each state keeps its own rules on money lenders.
Steps to a secure private loan in Nigeria
- Check the identity of the lender or borrower using their NIN and, for a professional, their state licence or FCCPC registration.
- Draft a loan agreement stating the amount in naira, the term, any interest rate, the repayment schedule and the consequences of late payment.
- Have both parties sign the agreement before two witnesses, and consider having it reviewed by a lawyer called to the Nigerian bar.
- Pay the funds by identifiable bank transfer, never in cash without a receipt, so you keep proof that can be used in court.
- Draw up a repayment table and keep every receipt or statement for each instalment paid.
- Ask your state tax office about stamping the agreement and taxing any interest received.
Indicative costs of a peer-to-peer loan in Nigeria
| Item | Indicative amount | Comment |
|---|---|---|
| Interest between relatives | Free, often zero | No national usury cap; an excessive rate can be challenged |
| Money lender licence in Lagos | ₦200,000 a year (indicative) | Plus ₦25,000 application fee; amounts to confirm with the state |
| Lawyer to draft the agreement | Variable | Fees are negotiable, agree them before drafting |
| Stamping the agreement | Variable | Depends on current tax legislation, to be checked |
| Tax on interest | According to the scale | Income to declare to the state tax authorities |
| Fees demanded by a fake lender | Total loss | No legitimate lender asks for payment before disbursement |
Documents to gather before a private loan in Nigeria
- National identity card or NIN slip
- Proof of income or recent bank statements
- Dated loan agreement signed before witnesses
- Details of the bank account for repayments
- Proof of the transfer of funds
- Repayment schedule signed by both parties
Mistakes and loan scam warning signs in Nigeria
- Paying processing, insurance or release fees before receiving the funds: this is the classic pattern of so-called 419 fraud.
- Giving your BVN, OTP codes or PIN to a so-called lender, who can then empty your bank account.
- Accepting an offer found on WhatsApp, Facebook or Telegram from a stranger posing as a foreign investor or bank agent.
- Installing a loan app missing from the FCCPC list of registered lenders that demands access to all your contacts.
- Lending a large sum in cash to a relative without anything in writing, believing family trust will be enough if a dispute arises.
Your questions on private lending in Nigeria
Can a private individual lend money at interest in Nigeria?
An occasional loan to someone close is possible, even with moderate interest. However, lending regularly to third parties to earn an income falls under state money lenders laws and requires a licence. Check with the relevant ministry in your state.
How can I tell whether a Nigerian loan app is legal?
The FCCPC publishes the list of registered or approved digital lenders. Compare the exact name of the app and the company, beware of copies in app stores and refuse any app that asks for access to your contacts or photo gallery.
Is there an approved peer-to-peer lending platform in Nigeria?
The SEC framework mainly covers financing for small businesses through registered portals, not consumer credit between individuals. Before investing, consult the SEC register and remember the limit of 10% of net annual income.
Where do I report a Nigerian fake lender scam?
File a complaint with the EFCC or the nearest police station, which can pass it on to the police cybercrime centre. Alert your bank immediately as well to try to freeze the funds, and report abusive apps to the FCCPC.