ADOPTING SMALL CLAIMS ACTION AS A COTEMPORARYALTERNATIVE IN RESOLUTION OF COMMERCIAL DISPUTES INNIGERIA

• Bidwells-admin
• Corporate Services, Debt, Debt recovery, Financial Services, Justice, Litigation
• July 22, 2025

ABSTRACT
The burden of recovering debts through conventional litigation in Nigeria
has proven to be both time-consuming and expensive, thereby
discouraging individuals and small businesses from pursuing legitimate
claims. In response to these concerns, the small claims action was
introduced as a streamlined alternative tailored to handle simple debt
recovery matters efficiently. This article examines the legal framework,
operational dynamics, and strategic advantages of adopting small claims
procedures in Nigeria as a contemporary panacea for debt collection. It
argues that small claims courts present a revolutionary shift toward
accessible justice, economic efficiency, and swift resolution of commercial
disputes.
INTRODUCTION
Debt recovery remains a critical concern in Nigeria’s legal and commercial
environment. Traditional litigation for debt collection, especially for sums
below ₦5 million, often results in inordinate delays, high legal fees, and
procedural complexities that defeat the purpose of justice. These systemic
inefficiencies discourage creditors from seeking redress and embolden
debtors to default without consequence.
The establishment of small claims courts across various jurisdictions in
Nigeria—most notably in Lagos, Kano, Ogun, Edo, Imo and FCT—has
opened a new frontier for resolving monetary disputes expeditiously and
affordably. This article explores how the small claims regime provides an
effective, contemporary solution to the endemic challenges of debt
recovery litigation in Nigeria.
UNDERSTANDING SMALL CLAIMS ACTION IN NIGERIA

1. Legal Framework and Jurisdiction
   Small Claims Courts in Nigeria are a division of the Magistrates’ Court,
   established by Practice Directions issued by the Chief Judges of various
   states, pursuant to the inherent powers of the judiciary. The Lagos State

Magistrates’ Court (Small Claims) Practice Direction, 2023, is a leading
model that has influenced adoption in other states.
Key features include:
 Monetary jurisdiction up to ₦5 million.
 Causes of action limited to simple debt recovery, breach of contract,
and recovery of movable property.
 Proceedings to be concluded within 60 days.

2. Procedural Innovations
    No need for legal representation (self-representation is encouraged).
    Simplified forms and documentation.
    Fast-tracked hearing and judgment.
    Emphasis on mediation and amicable settlement at the first stage of
   appearance.
   THE CASE FOR SMALL CLAIMS ACTION IN DEBT COLLECTION
3. Access to Justice and Informality
   Small claims courts reduce barriers to justice by allowing creditors,
   especially small businesses and low-income individuals, to initiate
   actions without legal technicalities. The informality of proceedings and
   self-representation promotes inclusiveness and autonomy.
4. COST-EFFECTIVENESS
   The elimination of high filing fees, lengthy adjournments, and mandatory
   legal representation translates into significant cost savings. This is
   particularly important in micro and small-scale commercial transactions
   where the cost of recovery must not exceed the debt itself.
5. TIME-EFFICIENCY AND CASE DISPOSAL
   The 60-day timeline for determination of small claims matters stands in
   stark contrast to the multi-year delays in conventional courts. Swift

resolution enhances business confidence, cash flow stability, and economic
growth by improving debt recovery rates.

4. DETERRENCE OF DEFAULT CULTURE
   The effectiveness and speed of the small claims’ mechanism serve as a
   deterrent to habitual defaulters who exploit the slow pace of conventional
   litigation to frustrate creditors.
5. JUDICIAL ECONOMY
   Small claims action decongests superior courts by filtering out minor
   commercial disputes. This enables higher courts to focus on complex and
   high-stake cases, thereby improving overall judicial efficiency.
   CHALLENGES AND LIMITATIONS
   Despite its promise, the small claims mechanism is not without drawbacks:
    Limited jurisdiction (currently capped at ₦5 million) excludes
   substantial debts.
    Lack of awareness among the general public and even legal
   practitioners.
    Varying levels of implementation across Nigerian states.
    Resistance by lawyers who may view the regime as a threat to legal
   fees.
   RECOMMENDATIONS
   To fully harness the potential of small claims actions for debt recovery, the
   following reforms are advocated:
6. Harmonization and Expansion: Enact a unified national framework or
   Federal Practice Direction to ensure consistency across jurisdictions
   and raise the jurisdictional limit periodically.
7. Public Sensitization Campaigns: Legal aid bodies, chambers of
   commerce, and civil society organizations should collaborate to
   promote awareness.
8. Digitalization of Processes: Integrate e-filing and virtual hearings to
   enhance accessibility and efficiency.
9. Training of Magistrates and Court Staff: Specialized training on ADR
   and commercial dispute resolution is crucial to the success of small
   claims courts.

CONCLUSION
In a legal system overburdened by technicality and delay, the small claims
court emerges as a bold innovation and a contemporary panacea to the
persistent challenges of debt collection. It democratizes access to justice,
fosters commercial confidence and preserves economic relationships.
While further reforms and expansion are necessary, the adoption of small
claims action represents a pivotal step toward a more efficient, responsive,
and just civil dispute resolution mechanism in Nigeria.