CBN Proposes Mediation Panel to Resolve Loan Disputes, Reducing Court Reliance
The Central Bank of Nigeria has put forward a significant proposal for the establishment of a dedicated mediation panel specifically designed to handle loan-related disputes. This initiative aims to substantially reduce reliance on traditional court systems in secured lending transactions, offering a more streamlined and efficient resolution pathway.
Framework and Jurisdiction Details
The proposal was formally outlined in a circular signed by P. I. Oluikpe, the Acting Director of the Development Finance Advisory Department at the CBN. This document invites stakeholders to review draft guidelines for creating a Mediation and Dispute Resolution Panel under the Secured Transactions in Movable Assets framework.
The apex bank explicitly stated, "The Panel shall, to the exclusion of any court of law or body in Nigeria, exercise first instant jurisdiction to hear and determine any dispute arising from the operation and application of the Act." This grants the panel primary authority over such matters, positioning it as the initial point of contact for dispute resolution.
Objectives and Legal Foundation
According to the CBN, this initiative is strategically designed to strengthen the overall financial ecosystem by providing a specialised, cost-effective platform for resolving disputes linked to lending backed by movable assets. "The Central Bank of Nigeria is developing guidelines and modalities for the operation of a Mediation and Dispute Resolution Panel," the circular added, emphasising the ongoing development process.
The move is firmly anchored on the Secured Transactions in Movable Assets Act, which already provides for mediation as the first point of dispute resolution between creditors and borrowers. The bank explained that the guidelines aim to ensure a structured and efficient system for handling disputes while simultaneously improving confidence in asset-backed lending arrangements.
"The key objective of the MDRP guidelines is to establish a clear and standardised procedure for managing STMA-related disputes, while ensuring transparency, fairness and efficiency," the CBN elaborated in its statement.
Operational Mechanisms and Panel Composition
Under the proposed framework, the panel will adopt alternative dispute resolution mechanisms and is expected to deliver decisions within a strict 90-day timeframe from the first hearing. Parties involved must agree to the panel's jurisdiction and demonstrate that they attempted informal resolution methods, such as negotiations, before escalating disputes to this formal panel.
"Parties shall demonstrate that they had made efforts to resolve the dispute through other informal means such as negotiations before escalation to the Panel," the document stipulated, highlighting the emphasis on preliminary resolution attempts.
The panel will consist of highly qualified professionals from diverse fields including law, banking, finance, and dispute resolution, each required to possess at least 10 years of relevant experience. The CBN plans to appoint a total of 30 members, with smaller panels of three constituted on a rotational basis to handle specific cases.
Enforcement, Appeals, and Confidentiality
Decisions rendered by the panel will carry legal weight, being binding and enforceable in court as consent judgments or awards. "The award shall be legally binding on the parties and enforceable in court as a consent judgment or consent award," the document noted. However, parties retain the right to appeal decisions on limited legal grounds within specified timelines, ensuring a balance between finality and fairness.
The framework also places strong emphasis on confidentiality, mandating that all proceedings and shared information must be rigorously protected. Funding for the panel's operations will be sourced from CBN support, administrative fees, and other contributions, ensuring financial sustainability.
Stakeholder Engagement and Broader Context
Stakeholders have been actively invited to submit feedback on the draft guidelines before the October 9, 2026 deadline, reflecting a collaborative approach to policy development. This development follows recent measures by the CBN to tighten credit discipline, including directives that restrict access to banking services for borrowers with non-performing loans.
These efforts are part of broader initiatives aimed at strengthening financial system stability and promoting responsible lending practices across Nigeria's economic landscape. The proposed mediation panel represents a proactive step towards enhancing dispute resolution mechanisms in the financial sector.
