Lending  money to receive interest on payback is considered illegal in Nigeria without a Moneylending licence. The money lending business basically involves lending money to customers at a higher rate either on a percentage basis or a fixed sum placed on the principal sum.

The Money Lenders Law Chapter M7 Laws of Lagos State in Section 2 defines a money lender as “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 as a principal or as an agent.”

The above section, however, exempts cooperative societies and companies empowered by a special law to lend money.

One of the advantages of this licence is that a lender can institute an action in court to recover both the Principal and the accrued interest once there is a default in payment.

To operate a money lending business, one must obtain a licence in accordance with the Money Lending Laws of the State where the business is located. The procedures are somewhat similar with a few exceptions or additions here and there. We shall examine the procedure in Lagos State below.

Section 4 of the Money Lenders Law Chapter M7 Laws of Lagos State states “that an individual that lends money at interest or even who lends a sum of cash in consideration of a bigger sum being repaid shall be presumed to be a cash lender until the contrary is actually proven”.

The Moneylenders licence is valid from January to December each year and is renewable annually.

The Moneylenders Licence application procedure is a three-step process in Lagos State; the first is to the Police, the second is to the Chief Magistrate’s Court within the magisterial district which the business falls under whilst the last is to the Ministry of Home Affairs of the Lagos State Government.

The first step is to make an application to the Commissioner of Police, Lagos State Police Command. The essence of this application is to investigate the previous activities of the company or its directors and to clear them of any criminal activities or any activities that may discredit their existence as moneylenders.

The Office of the Commissioner of Police would also recommend after this search or investigation is concluded and the company found to be suitable that the operational license of the company is issued or renewed.

The application includes a cover letter for the application, the Certificate of Incorporation as well as the Memorandum and Articles of the Company.

At the conclusion of this first step, the Office of the Commissioner of Police would issue a Clearance Report either clearing the company or discrediting it as well as giving its recommendations for the issuance of the licence as explained above.

The second step is to make an application to the Chief Magistrate’s Court located within the Magisterial District where the business is situated.

The application contains the following:

  1. 1. A cover letter;
  2. Copy of the Certificate of Incorporation;
  3. Copy of the Memorandum and Articles of Association; and
  4. Police Clearance Report.

Once the application is approved, a Money Lenders Certificate (Form B) would be issued by the Chief Magistrate Court along with a letter addressed to the Ministry of Home Affairs known as Form C.

The third and final step is the application for the licence at the Ministry of Home Affairs and Tourism of the Lagos State Government.

The application includes  the following:

  1. A cover letter;
  2. Application Form which will be purchased, filled and returned with the rest of the documents;
  3. Certificate of Incorporation of the Company;
  4. Reference Letter from a commercial bank;
  5. Tax Clearance Certificates or Pay As You Earn (P.A.Y.E.) Certificate for three years for at least two directors of the company;
  6. Forms B and C as received from the Chief Magistrate’s Court;
  7. Certified True Copy of all Incorporation Documents;
  8. Tax Clearance Certificate for the company if it has been in existence for a while or in case it’s a newly registered company then a proof that the business is actually a registered taxpayer.
  9. Police Clearance Certificate for two directors of the company showing fingerprints of the two directors and their passports.
  10. Payment for the registration of the Money Lender’s Licence fee shall be made into the Lagos State Government Account. Evidence of payment of the said fee into the account should be attached in addition to the aforementioned documents.

Inspection of the official premises of the company will be done by the officials of the Ministry of Home Affairs and Tourism. The inspection would include the books, , , signage and premises of the company. If the officials are satisfied with the premises, the applicant will be issued with the Money Lenders Licence.

For subsequent annual renewals, the following documents are required:

  1. An application for renewal;
  2. Forms B and C;
  3. Copy of the previous licence issued;
  4. Evidence of payment of the renewal fee; and
  5. Tax Clearance of the year in question