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Legal Alert – January 2007 – Micro Finance In Nigeria
 
In this Issue:-
1. Subscribe & Unsubscribe to Legal Alerts.
2. Business Quote of the month.
3. Legal Alert January 2007 – Micro finance in Nigeria.
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Business Quote.
"If we were meant to talk more than listen, we would have Two Mouths and One Ear" – By Mark Twain
Legal Alert - January 2007 - Microfinance in Nigeria
Introduction.
Modern economies rely on small and medium scale industries to serve as the foundation for the continuing growth of their economies. In Nigeria, small and medium scale industries have been unable to grow as a result of the non availability of affordable credit facilities from existing financial institutions, and lack of minimum public utilities and infrastructure like regular power supply, roads, certainty in tax liabilities and collection, security of lives and properties, health care delivery, etc.
The effort of the regulatory Bank in Nigeria to remedy the above credit problem by having Nigerian banks mandatorily contribute a portion of their profits to fund small and medium scale industries have equally failed because of:
a. Lack of appropriate institutional framework and documentation for micro finance businesses.
b. Lack of confidence between the formal Banks and the informal small and medium scale proprietors (SME).
c. Absolute ownership culture by SME owners which discourages venture capital entrepreneurs and commercial Banks entering into short term partnerships with SMEs.
d. High interest rates due to short term money market.
e. Allegation of insider dealings by Banks under the Small & Medium Enterprises Equity Investment Scheme as a result of the problems enumerated in items (a) to (d) above.
The failure of the SMEEIS (Small and Medium Enterprises Equity Investment Scheme) has led the Central Bank of Nigeria (CBN) to introduce and regulate the establishment of Micro Finance Banks in Nigeria in a further effort to remedy some of the problems enumerated above.
What is Micro Finance?
Micro Finance is the process of extending small and short term collateral–free loans and other financial services to small business owners that are unable to access these same services from the formal financial lending institutions.
What is a Micro Finance Bank?
A Micro Finance Bank (MFB) is described by the Micro Finance guidelines issued by the CBN as any company licensed by the Central Bank of Nigeria to carry on and provide financial services such as opening and maintaining savings accounts, granting short term collateral-free loans, offering domestic money transfer services, and providing other financial services to small income earners, small and medium scale entrepreneurs, etc.
Types of Micro Finance Banks in Nigeria
1. Micro Finance Banks licensed to operate within a local government area and restricted to that area. This type of Micro Finance Bank must have a capital base of N20Million.
2. Micro Finance Bank licensed to operate in a State with branches only in that State. This type of Micro Finance Bank must have a capital base of N1Billion.
A MFB must obtain an additional licence in order for it to be able to operate in another Local Government Area or State not designated in the original licence of the MFB.
Maximum Credit & Tenor of Credit
Presently, the maximum amount that a MFB can extend to a client is N500,000 (Five Hundred Thousand Naira). The maximum tenure of a Micro Finance loan is 180 days or 6 months. For agricultural crops, the maximum tenor for repayment is 12months.
Prohibited Businesses of a MFB
a. Dealing in land for speculative purposes and real estate business that is not for the MFB's office accommodation.
b. Credit facilities for speculative purposes.
c. Direct cheque clearing activities.
d. Foreign exchange and International commercial activities.
e. Corporate finance.
f. Any commercial activity that involves speculation in its dealing.
Tax Treatment of MFBs
The guidelines regulating Micro Finance Banks provides for exemption from companies income tax, of the profits of a MFB, if and only if the MFB does not distribute its net surplus among its shareholders but reinvest the profits by extending them as credit to its Customers.
Advantages of MFBs
1. Collateral-free loans to small scale entrepreneurs.
2. Networking opportunities for business counseling, mentoring and advise.
3. Peer support among members of a MFB, in good times and bad times.
4. Client friendliness and simplicity of operation of MFBs.
5. Deposits with MFBs are covered by insurance provided by the National Deposit Insurance Corporation (NDIC).
Possible Disadvantages of MFBs
1. High Interest Rates because of their collateral-free and short term nature.
2. Poor repayment culture to credit facilities by SME entrepreneurs; some SME operators may misunderstand MFBs loans to be their share of the national treasury.
3. Insufficient education among operators of MFBs on the differentiation between MFBs and regular Commercial Banks.
4. Lack of a credit bureau/data Bank to monitor small business owners with poor credit ratings and abuse of credit from MFBs.
Conclusion
The successes of Micro Finance Institutions in Nigeria without equal advancements in energy/power supply, roads, education, health care, security, etc. would not eradicate or reduce poverty. Equally disturbing is the high profile of the operators of MFBs who perceive their institutions as secondary players to the larger commercial Banks.
It is expected that continuing enlightenment support and enforcement by the regulator, CBN, on what MFBs are meant to do and achieve, and unreserved punishment for violators of MFBs guidelines would improve the medium to long term conditions of MFBs in Nigeria.
DISCLAIMER NOTICE. This Legal Alert is a free educational material, for your general information and enlightenment ONLY. This Alert, by itself, does not create a Client/Attorney relationship.
Recipients are therefore adviced to seek professional legal counsel to their specific situations when they do arise. Questions, comments, criticisms, suggestions, new ideas, contributions, etc are always welcomed.
This Legal Alert is protected by Intellectual Property Law and Regulations. It may however be shared with other parties provided that our Authorship is acknowledged always and this Disclaimer Notice is attached.
Legal Alert October 2008 Corporate Social Responsibility Bill
 
In this Issue:
1. Legal Alert for October, 2008 – Corporate Social Responsibility Bill.
2. Subscribe & Unsubscribe to Legal Alerts.
3. Disclaimer Notice.
Legal Alert for October 2008 – Corporate Social Responsibility Bill
Introduction:
The exploration of mineral resources have resulted in grave environmental degradation of the local areas where the exploration activities are taking place with the associated consequence of civil and military unrest, poverty, lack of minimum and or basic infrastructure, etc.
Exploration corporations, especially the multinationals some of whom are into joint venture arrangements with the federal government of Nigeria, are usually in a quagmire with their host communities in the discharge of their corporate responsibilities to the government, in the form of high mineral and corporate taxes, and their equally important social responsibilities to their host communities. The latter is frustrated by government's inability to efficiently discharge its constitutional duty of providing the basic necessities of life to the host mineral communities and the conflict of interest of the host mineral community leaders with those of their community members, whom they have sworn to serve.
In the hope of addressing some of the above problems, the Nigerian upper house of parliament, i.e. the Senate, is presently considering passing into Law a Corporate Social Responsibility Bill ("CSR Bill"). This Alert seeks to provide a purview of what Corporate Social Responsibility ("CSR") entails and also what the CSR Bill seeks to achieve.
What is Corporate Social Responsibility?
Society and businesses have always recognised that doing good is essential and fundamental to mankind. The concept of Corporate Social Responsibility ("CSR") has therefore tried to capture the various ramifications and benefits of doing good in our community.
According to Wikipedia, the free online encyclopaedia, CSR extends beyond the statutory obligations of a person or corporation; in it's stead, CSR sees a person or corporation taking further voluntary steps to improve the quality of life of their employees and their families as well as the welfare of the local community and the larger society where they carry out their activities.
Also in a paper entitled "Corporate Social Responsibility in Nigeria: Western Mimicry or indigenous practices?" by Kenneth M. Amaeshi, Bongo C. Adi, Chris Ogbechi and Olufemi O. Amao, the authors adopted the definition of CSR as propounded by McWilliams & Siegel to the effect that CSR are "... actions that appear to further some social good beyond the interest of the firm and that which is required by law".
The above Paper goes further to state that CSR in substance is not a modern concept as corporations from the earliest time of record keeping have realised the added value of doing good in the communities where they operate. The authors expressed concern that there are no statutory provisions for CSR in Nigeria or for a mechanism for bench marking its performance. In its stead, the supremacy of the interest and survival of the shareholders of a corporation are legally promoted by existing Nigerian Law above minimum CSR requirements. This is in marked contrast with other jurisdictions like the United Kingdom where the concept of an "enlightened shareholders value" amongst other things requires companies to report on the impact of their operations on other stakeholders in the society like their employees, suppliers, host communities, the environment, etc.
Corporate Social Responsibility Bill
Corporate Social Responsibility Commission
The CSR Bill seeks the establishment of the Corporate Social Responsibility Commission ("CSR Commission") with its primary functions including the formulation, implementation, supervision and provision of policies and reliefs to host communities for the physical, material, environmental or other forms of degradation suffered as a result of the activities of companies and organisations operating in these communities.
The CSR Commission is required by this Bill, when passed into Law, to be a body corporate with its own common seal and the legal authority to sue and be sued, to purchase or sell its property, etc. The CSR Commission is also expected to be administered on a daily basis by a Director General with assistance from other departmental directors and a governing council.
CSR Utilisation Charge
The CSR Bill mandatorily seeks to compel all registered companies in Nigeria to utilise not less than three and a half percent (3½%) of their annual gross profits on CSR programmes in their locations of doing business. Such programmes are expected by this Bill to include educational, cultural, environmental and economic programmes.
Penalty for None Compliance
The CSR Bill recommends the authorisation of the CSR Commission to temporarily shut down and suspend the operations of any company, corporation or organisation, for a minimum number of 30 days, as penalty for none compliance with the statutory requirement(s) of this proposed Law.
The CSR Bill further provides that first offenders of the statutory provisions of this proposed Law shall be liable to a fine of not less than 2% of the offending organisation's or corporation's gross annual profit in addition to the statutory CSR contribution that was not expended. For subsequent none compliance, the penalty is a fine of not less than 3.5% in addition to the mandatory compliance with the statutory CSR obligations of the company or organisation for the period under consideration.
The CSR Bill also makes it a criminal offence for any person or organisation or corporation or company to wilfully withhold information from the CSR Commission or to wilfully fail to comply with the lawful directives of the CSR Commission. Should such a party be prosecuted and convicted, he/she shall be liable to imprisonment for a term of not less than six months imprisonment.
Conclusion
The culture of doing good comes from cultural awareness, habitual practice and conviction as opposed to coercive legislation. The CSR Bill does not make provision for extensive enlightenment of the society on the benefits of CSR. An amendment in this regard is therefore recommended.
The CSR Bill does not reiterate the minimum constitutional duties that are imposed on the Nigerian government. Until all governments in Nigeria provide good leadership and governance, local and multinational companies would always feel short-changed by the Nigerian authorities.
The CSR Bill is more of a reactive legislation as opposed to a proactive Law. An amendment in its reactive objectives is therefore also recommended.
The CSR contributory charge could be a disincentive to investments in Nigeria in the light of the already existing high and multiple taxes at various strata of the Federal, State and local governments. The proposed charge of 3½% could be reduced to a basic minimum charge for all companies and organisations whilst the penalty charge for none compliance with the statutory requirements of the Law could be increased by the same margins of the CSR charge itself.
The CSR Bill has failed to follow recent legislative practices which impose criminal liability on both the corporation and all the directors and managers of any corporation or company who are aware of the breach of an existing Law. The CSR Bill should therefore be amended to capture this requirement.
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This Alert and others produced by us are provided without any charge to you. You can always subscribe to it, on behalf of other interested persons from whom you have their permission, by sending to us a one line e-mail with the words "Subscribe – Legal Alerts" followed by the desired email address.
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DISCLAIMER NOTICE. This Legal Alert is a free educational material, for your general information and enlightenment purposes ONLY. This Alert, by itself, does not create a Client/Attorney relationship between yourself and our Law Firm.
Recipients are therefore advised to seek professional legal counselling to their specific situations when they do arise. Questions, comments, criticisms, suggestions, new ideas, contributions, etc are always welcomed with many thanks.
This Legal Alert is protected by Intellectual Property Law and Regulations. It may however be shared with other parties provided that our Authorship is always acknowledged and this Disclaimer Notice is attached.
Legal Alert Nigerian Industrial Training Fund
 
In this Issue:
1. Legal Alert for August, 2008 – Nigerian Industrial Training Fund.
2. Subscribe & Unsubscribe to Legal Alerts.
3. Disclaimer Notice.
Legal Alert for August 2008 – Nigerian Industrial Training Fund
Introduction:
There are reports of the Nigerian Industrial Training Fund ("the Industrial Training Fund") obtaining Court judgments against employers that fail to register and make statutory contributions to the Industrial Training Fund. The defence of none receipt by employers of any assessment from the Fund has largely not succeeded in the light of the provisions of the Industrial Training Fund Act, 2002 ("Industrial Training Fund Law").
A general lack of appreciation and or information on the functioning of the Industrial Training Fund could expose businesses to civil and criminal liability for non compliance with the Industrial Training Fund Law. This Alert is to give some succinct information on the functioning and advantages of the Fund to businesses in Nigeria.
Functions of Industrial Training Fund
The Industrial Training Fund was established by Law in 1971 to promote, accelerate and encourage the acquisition of indigenous skills required in industry and commerce to meet the developmental needs of Nigeria.
Direct Functions of the Fund
The Industrial Training Fund provides direct specialised training in the areas of research and consultancy services, engineering and technology, management, human resources development, safety, computers and information training, vocational and apprentice training, accounting and financial management, advisory and management consulting,
Duty of Employers under the Fund
The Industrial Training Fund Law mandatorily requires every employer having 25 or more employees with apprentices on its pay roll, in each calendar year not later than the 1st day of April of each such year, to contribute one percent of the amount on its pay roll to the Fund.
The description of employees in the Industrial Training Fund Law has a wide definition as it includes Nigerians, non Nigerians and contract staff engaged for more than three months in one calendar year whether on full time or part time basis, for salary or wages or such other consideration that may exist between the employer and the employees.
The very essence of the Industrial Training Fund is to encourage employers to provide adequate training for their indigenous employees in disciplines related to their jobs in order for there to be further improvement in the manpower capability of the employees which in turn benefits' the employers and the country.
The Industrial Training Fund Law also requires employers to accept students on industrial attachment and training in furtherance of the objectives of this Law.
Contributions to the Fund
As stated above, every employer with more than 25 employees and apprentices must contribute one percent (1%) of the amount on its pay roll to the Industrial Training Fund.
The Industrial Training Fund through its governing Council may refund up to 60% of the amount contributed by a up-to-date levy contributor/employer to the Fund if the Council is satisfied that the training programme of the employer for its employees in the relevant period is adequate. According to the Industrial Training Fund, the aim of the reimbursement scheme is to ensure that training activities of every employer is evenly distributed amongst the various strata of each employer's work force.
All refunds must be notified to the Federal Board of Inland Revenue ("FBIR").
Further Condition for Reimbursement
A further condition that a levy contributor/employer must meet in order to claim up to 60% in reimbursement is the requirement that a minimum of 15% of the total workforce of the employer must be trained annually before such an employer can qualify for the full 60% reimbursement under the Fund.
Applications for reimbursements must be accompanied by evidence of the nature of the training that the employees or apprentices attended with the training course receipts, certificates of attendance and receipts of levy paid to the Industrial Training Fund.
Penalties for none Contributions
Any employer that is required to make contributions under this Law and fails to make such a contribution within the prescribed period is liable on conviction to pay the contribution in addition to a fine of 5% of the amount that is unpaid.
Corporate Employers that do not train their employees are equally liable on conviction to a fine of N5,000 for the first breach and N10,000 for each subsequent breach. Principal officers of corporate employers could equally be liable if found quilt to a fine of N1,000 or to a term of imprisonment of two years imprisonment for a first breach and where a second or subsequent breach occurs, to a term of two years imprisonment without the option of a fine.
Recovery, Statute of Limitation & Disclosures
Any contribution that is not made with any related fine are recoverable as debts in civil proceedings within a period of six years from the date when the contribution or contributions ought to have been made.
Employers who fail to furnish returns and or information about their employees and their training programmes to the Industrial Training Fund may find themselves exposed to the discretion of the Fund using its best of judgement assessment as to the appropriate amount to be contributed by the employer to the Fund. This is without prejudice to the Fund reverting to the employer at such future time should the Fund discover that its best of judgement assessment was underestimated.
False or deliberate untrue information and returns provided to the Fund by an employer is an offence which on conviction, for a corporate body, attracts a fine of N5,000 for a first offence and N10,000 for each subsequent offence. For executives of the corporate body, the penalty is a fine of N1,000 or two years imprisonment for a first offence and three years imprisonment without the option of a fine for each subsequent offence.
Conclusion
The Industrial Training Fund has not fulfilled its enormous potential of ensuring that the required manpower skills and knowledge required by the country in the twenty first century are provided to the Nigerian economy. Employers and employees do not have the necessary information about the requirements and workings of the Industrial Training Fund or the advantages of training their work force.
Employers who comply with the provisions of the Industrial Training Fund Law and send their employees to relevant training programmes could have the efficiency and profits of their enterprise further maximised by a knowledge based skilled work force. Advance annual liaison with the Industrial Training Fund as to the local and overseas training programmes that the employer would undertake in the future with request for suggestions from the Fund would be of benefit to all concerned.
Further information about the Industrial Training Fund can be found on its website www.itf-nigeria.com which is an invaluable resource in the preparation of this Alert.
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This Alert and others produced by us are provided without any charge to you. You can always subscribe to it, on behalf of other interested persons from whom you have their permission, by sending to us a one line e-mail with the words "Subscribe – Legal Alerts" followed by the desired email address.
You are equally permitted to terminate your subscription by sending to us a one line email with the words "Unsubscribe - Legal Alerts" and your electronic address would be removed from our list. In the future, you can return to our mailing list by visiting our web site www.oseroghoassociates.com to subscribe for the Legal Alerts.
DISCLAIMER NOTICE. This Legal Alert is a free educational material, for your general information and enlightenment purposes ONLY. This Alert, by itself, does not create a Client/Attorney relationship between yourself and our Law Firm.
Recipients are therefore advised to seek professional legal counselling to their specific situations when they do arise. Questions, comments, criticisms, suggestions, new ideas, contributions, etc are always welcomed with many thanks.
This Legal Alert is protected by Intellectual Property Law and Regulations. It may however be shared with other parties provided that our Authorship is always acknowledged and this Disclaimer Notice is attached.
Legal Alert Real Estate Investments & Rent Control Law in Nigeria
 
In this Issue:
1. Legal Alert for June, 2008 – Real Estate Investments & Rent Control Laws in Nigeria.
2. Subscribe & Unsubscribe to Legal Alerts.
3. Disclaimer Notice.
Legal Alert for June 2008 – Real Estate Investments & Rent Control Laws in Nigeria
Continuing increase in population especially in the urban areas of Nigeria has lead to astronomical increase in the demand for affordable housing whilst the supply side remains for the most part underdeveloped and unable to meet growing demand. Attempts by the Nigerian government to increase investments in the real estate side of the Nigerian economy have remained unsuccessful as a result of the following factors:
a. Expensive, cumbersome and complicated land tenure and transfer of legal title in land procedures.
b. Expensive cost of funds with high interest rates for construction and mortgages in comparison to the long term rentals expected by an investor in the real estate market.
c. Rent control legalisation for the mass residential rental market.
d. High rate of Tenants default in paying their rentals on schedule due in some cases to diminishing purchasing power.
e. Technical, cumbersome and expensive recovery of possession of premises legislations.
The effort of the Federal Government of Nigeria to address this problem by proposing a Rent Control legalisation has met with criticism as a result of the failure of the supply side of the real estate market and also, the failure of prior and subsisting Rent Control legislations and home ownership schemes to address the problems of minimum housing in Nigeria.
This Alert would provide up-to-date legal information on the last two factors of rent control and recovery of possession of premises which have and continue to challenge and inhibit investments in the real estate market.
Rent Control Law
Rent Control is a residual matter under the 1999 Constitution. As a result, most of the States in Nigeria have their individual Rent Control Laws which for the most part have similar provisions as the Rent Control Law of Lagos State.
In Lagos State of Nigeria, the applicable Law is the Lagos State Rent Control & Recovery of Residential Premises Law, 1997 ("Lagos Rent Control Law").
The Lagos Rent Control Law is intended to mandatorily regulate the rentals that can be charged for residential apartments in certain areas of Lagos State whose residences were at the time of the enactment of this Law not charging annual rental value in excess of N250,000 (Two Hundred and Fifty Thousand Naira).
This Law prescribes the standard rent for each type of residential accommodation in different locations of the State with the caveat that the standard rent shall only be subject to upward review of not more than 20% every three years or at such other duration as the Governor of Lagos State may prescribe.
The Lagos Rent Control Law makes it unlawful for the Landlord or his agent or the Tenant to demand or pay rent in excess of the standard rent. It is also unlawful for a Landlord to demand or receive the prescribed standard rent for a period in excess of six months from an incoming/new Tenant. Equally unlawful is the action of a sitting Tenant offering to and paying the standard rent in excess of a period of three months in respect of any type of residential accommodation to which the Lagos Rent Control Law applies.
Any person who receives or pays rent in excess of the standard rent that is prescribed by Law is guilty of an offence and liable on conviction to a fine of N50,000.00 (Fifty Thousand Naira) or to a term of six months imprisonment.
Agency & Legal Fees
The Lagos Rent Control Law requires that Solicitors and estate agents must not charge more than 5% as Solicitors fees for preparing Tenancy Agreements and 5% as agency fees respectively. Where a higher percentage of fees is charged and received, it shall be unlawful. The penalty on conviction for this unlawful charge is a term of imprisonment for two years.
Recovery of Possession of Premises
Cases of abuses by Landlords in unlawfully evicting their Tenants necessitated the Rent Control & Recovery of Residential Premises Law of Lagos State, like prior legislations before it, to seek to protect all tenancies to which this Law applies.
The protection afforded tenancies by this Law is not intended to deprive a land owner of the fruits of his or her or its investment in real estate. The protection only requires that a Tenant should only loose his tenancy after due recovery procedure and processes are complied with by the Landlord.
Where there is a default by a Tenant in respect of any aspect of his Tenancy and the Landlord intends to terminate the Tenancy and have possession of his property revert to him the Landlord, a proper notice to quit must be personally served on the Tenant. This is the first and most technical of the procedures for recovering possession of premises.
The length of notice to be given to a Tenant to quit is usually determined by the tenure of the tenancy where no express unequivocal provision is made in a written Tenancy Agreement to such effect. Thus, where the Tenant pays his rent on a weekly basis, a week's notice to quit would be valid. Similarly, where the rental is paid monthly, quarterly, half-yearly or yearly, a month, quarter or half yearly notice as appropriate would be valid to determine the Tenancy.
It is mandatory that the notice to quit must be issued and served personally on the Tenant. It is also mandatory that the notice to quit must be served to expire at the anniversary or expiration of the Tenancy. Thus, a notice to quit in respect of a tenancy that begins in January of a particular year and expires in December of the same year must be served on the Tenant on or before the end of June of that year so that from 1st July to the end of December of the same year, the mandatory six months notice would have been properly served on the Tenant. This was the holding of the Supreme Court of Nigeria in the matter of African Petroleum v. Owodunni (1991) 11-12 SC 56 @ 71 lines 5-15.
The inability of most Landlords to comply with the technical requirement of serving the statutory notice to quit to expire at the same time with the tenancy drew the displeasure of the Supreme Court in the above cited case where for twelve (12) years, the Respondent Tenant could not be evicted because the notice of eviction was not properly served by the Landlord on the Tenant.
The view of some Solicitors that a tenancy for a fixed term does not require a notice to quit but only a notice of the owner's intention to recover possession of his premises is too risky a position to implement should the matter be placed before a court of law for adjudication.
Unlawful Eviction or Recovery of Premises
The frustration with applying the legal process to evict an unwilling Tenant has lead to many Landlords attempting other unlawful procedures to evict such an unwilling Tenant whose tenancy has been properly determined in accordance with the Rent Control & Recovery Premises Law.
The Lagos State Rent Control & Recovery of Residential Premises Law prohibits any form of demolition, alteration, modification, harassment or molestation of a Tenant where the principal objective is the forceful ejection of the Tenant. Contravention of this provision by the Landlord or his agents or privies is an offence which on conviction attracts a fine of N20,000.00 (Twenty Thousand Naira) to N50,000.00 (Fifty Thousand Naira) and a term of imprisonment of three months.
Business Premises
Up-market residences, that are not listed in the schedule of the Lagos Rent Control Law, with business premises are regulated by the Recovery of Premises Law No. 9 of 1976 ("Recovery of Premises Law").
The provisions of the 1976 Recovery of Premises Law are very similar to those of the 1997 Rent Control Law with the distinct difference being that business premises do not have a mandatory chap on what the land owner can charge as periodic rentals. Up market residences and business premises also have a higher rental collection history as opposed to downtown residences. Investors would therefore do well to ensure that all the provisions in relation to recovery of possession of premises are adhered to whenever the situation arises.
Lagos Mediation Centre
The Lagos State Government has established a Citizens Mediation Centre where disputes including those of Landlord and Tenant disputes are resolved through mediation. Where mediation fails or any of the parties refuses to submit to mediation, the parties would be advised by the Centre to seek redress in Court.
Conclusion
The provisions of the rent control and recovery of premises laws in Nigeria have been held more in disobedience than in obedience for many years as a result of the scarcity of new apartments or the maintenance of existing apartments.
The attempt to regulate rental values for properties in Nigeria has reduced the interest to invest in real estate in Nigeria. Research also shows that rent control schemes in other parts of the world that are not indexed against market forces of demand and supply usually do not maintain the minimum acceptable human standards for good housing.
The Nigerian government must review the land tenure system in Nigeria such that the original owners of so-called communal land and private sector investors are able to collectively work towards meeting the developmental goals set for the people of Nigeria.
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This Alert and others produced by us are provided without any charge to you. You can always subscribe to it, on behalf of other interested persons from whom you have their permission, by sending to us a one line e-mail with the words "Subscribe – Legal Alerts" followed by the desired email address.
You are equally permitted to terminate your subscription by sending to us a one line email with the words "Unsubscribe - Legal Alerts" and your electronic address would be removed from our list. In the future, you can return to our mailing list by visiting our web site www.oseroghoassociates.com to subscribe for the Legal Alerts.
DISCLAIMER NOTICE. This Legal Alert is a free educational material, for your general information and enlightenment purposes ONLY. This Alert, by itself, does not create a Client/Attorney relationship between yourself and our Law Firm.
Recipients are therefore advised to seek professional legal counselling to their specific situations when they do arise. Questions, comments, criticisms, suggestions, new ideas, contributions, etc are always welcomed with many thanks.
This Legal Alert is protected by Intellectual Property Law and Regulations. It may however be shared with other parties provided that our Authorship is always acknowledged and this Disclaimer Notice is attached.
Legal Alert May 2008 Legality of Bank Interest Rates In Nigeria
 
In this Issue:
1. Legal News
2. Legal Alert for May, 2008 – Legality of Bank Interest Rates & Charges.
3. Subscribe & Unsubscribe to Legal Alerts.
4. Disclaimer Notice.
Legal News
The accolades that the Lagos State Government has received in the introduction of the 30 day rule in the transfer of legal interest in landed property would ultimately wane and evaporate if the promise of the rule is not adhered to strictly. It for example takes days to pay for fees and obtain the relevant receipts from the treasury. The practice of privately facilitating the consent without which the process would be stalled is most unfortunate. It is hoped that the Lagos State Government would develop checks and balances in order for it to encourage private investments in real estate businesses in Lagos State.
Legal Alert for May 2008 – Legality of Bank Interest Rates & Charges in Nigeria.
Differences between banks and their customers over interest rates and other bank charges have reintroduced the distrust that customers have for banks. Some Nigerian banks are now charging a fee of N105 as maintenance fees on the savings account of their customers without any explanation or notice to the customers. Others have imposed some of their consolidation costs on their customers. The number of litigations on this subject has in turn increased.
This Alert is intended to very briefly provide some general information on what the Nigerian Law and Nigerian Courts have decided as the rules governing the imposition of bank charges and interest rates on customers in Nigeria. Suggestions are also made on a more transparent method of charging these fees.
Legality of Bank Charges & Interest Rates
The primary rule in all banking transactions is that the relationship between a bank and its customer is regulated by the written contract between the bank and the customer at the time of the opening of the bank account or accounts and such subsequently arrangements that may be agreed upon in the cause of their normal day-to-day banking business.
Nigerian Law and Courts jealously adhere to the terms and conditions of a written contract except where fraud, misrepresentation or other intervening circumstances is shown to exist.
Nigerian case law acknowledges that where there is no express provision in the contract between a bank and its customer - which is very rarely the case these days - Nigerian Law follows the universal practice which acknowledges that a bank is only entitled to charge simple interest.
Nigerian Law also recognises that subject to contract, interest rates and bank charges are not static and immutable.
The above stated universal practice and custom can however be varied by a written agreement between the bank and the customer with the customer authorising the bank to charge interest or other charges at rates above the ones recognised to be simple interest. Unfortunately, many customers do not pay close attention to the documents that they execute in favour of their banks and this leads to conflicts when an alleged debit is shown in the account of the customer.
Protection for Bank Customers
The principal protection for a bank's customer is to always ensure that he or she pays very close attention to the terms and conditions of any document that he or she receives from his or her bank with a demand for the customer to execute it. Whilst most of the terms and conditions of these documents are claimed to be standard and non-negotiable, their implications are permanent.
The Nigerian Consumer Protection Council is by law required to protect the interest of all consumers in all areas of products and services by providing speedy redress to consumer complaints, etc. See the web site – www.cpcnigeria.org - of this Council for more details. Unfortunately, institutional regulation in Nigeria remains weak and would only be enthroned when pressure groups and more consumers file petitions to the Consumer Protection Council.
In the United Kingdom, the Office of Fair Trading – www.oft.gov.uk – has successfully won a high court decision which authorises the Office of Fair Trading to assess for fairness the standard form contracts between banks and their customers in relation to the charges that are imposed on customers of banks. Other private customers have equally succeeded in this regard and obtained compensation in the form of refunds for unauthorised charges.
Conclusion
Continuing distrust between banks and their customers over bank charges and interest rates are inimical to the development of the banking culture in Nigeria. Full disclosure and good faith would in the long run be more profitable to the banks, their customers and the country. Banks disclosing the full components of special or extraneous charges could be a beginning.
Consumer protection laws in Nigeria require further improvements in the areas of empowering the Nigerian Consumer Protection Council in the discharge of its statutory functions as its contemporary in the United Kingdom, the Office for Fair Trading, is doing.
Consumer protection pressure groups need to develop in Nigeria with the sole responsibility of protecting all consumers of goods and services.
The Nigerian consumer needs to pay closer attention to his or her business activities. Many Nigerians do not receive bank statements and when they do, they do not read it closely and raise objections to charges that do not form part of their contract with their bank. Failure to raise any objections to any disputed entry to your bank statement is an implied consent to abide by the entry.
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