The Law of Banking refers to the body of Legal Rules and principles that regulate the governing of banking business importantly, the relationship between banker and their customers. It covers core banking activities such as the acceptance of deposits, operation of accounts, the granting of loan and advances. In contemporary commercial practice, banking institutions play a central role in stimulating economic growth through the provision of credit facilities such as loan, overdraft, advances and other forms of financial accommodation that enable individuals, corporate bodies and even governmental institutions to finance consumption, investment and expansion that strengthen modern commerce which otherwise would have been severely restricted. However, lending is inherently risky once money leaves the possession of the bank or lender, repayment depends largely on the borrower’s willingness and ability to honour the agreed terms. Although every credit facilities are backed by a contractual obligation to repay either on demand or at specified time. Reality occurrence over time has demonstrated that defaulters are common in their defaulting habits. In Nigeria, our court system, have consistently upheld bank’s right to demand repayments of sum advanced. Nevertheless, the enforcement of such repayment may become complicated where the borrower lacks the means or refuses to pay. It is in this context, that security becomes crucial though not the primary source of repayment but secondary. In the law of banking, security operates as the banker’s ultimate safeguard and protective mechanism relied upon on defaults when all other means of recovery failed. This appraisal critically examines and evaluates the legal framework underpinning operational modalities, judicial interpretations, concepts, elements, characteristics, types, enforcement and policy implications of security as the ultimate secondary loan recovery mechanism rooted from statute such as BOFIA Act 2020, CAMA 2020, NDIC, Case Law and CBN guidelines. It argues that while security boosts lender confidence, its relegation as last resort status exemplifies equitable lending practices in Nigeria’s evolving credit landscape. The discourse is particularly pertinent amid Nigeria’s 2025 Non-Performing Loan (NPL) ratio of 4.2% down to 5.2% in 2024 attributable to robust regulatory interventions emphasizing negotiation over enforcement.
Kola Amirekolade (Mon,) studied this question.