MITIGATING CRISES IN THE NIGERIAN BANKING INDUSTRY THROUGH EFFECTIVE APPLICATION OF PRUDENT MORTGAGE PRINCIPLES

ABSTRACT

This work identified non-performing loans as a major contributor to banking crisis. Albeit many loans were secured with mortgages, recovering them proved impossible owing to many factors which militate against realization of mortgage securities. This work therefore examined these factors that hinder realization of mortgage securities and proffered solutions to them in order to enhance debt recovery. The work discussed the canons of good lending; the factors that lenders should reckon with in deciding whether or not to grant a loan. It also discussed land mortgages with emphasis on statutes that have bearing on land mortgages. Mortgage of personal chattels, ships, companies‟ assets and shares were also discussed. Incidence of bank failures in different countries was discussed. The work adopted the doctrinal method of research; placing reliance on primary and secondary materials. The primary materials include legislation while the secondary materials include case law, text books, reports, and internet materials. The study found out that the slow judicial process in Nigeria is a serious challenge to realization of mortgage securities. The land Use Act‟s requirement of Governor‟s consent to alienation of land was also considered an albatross to mortgage transactions In Nigeria. The Auctioneers Laws‟ requirement that notice of sale of mortgage properties must be publicized before the sale can be valid was also found to be a bane to the realization of mortgage securities. Therefore, we recommended incorporation of Alternative Disputes Resolution mechanisms in mortgage deeds to reduce resort to litigation to settle mortgage related disputes. We also recommended exemption of mortgage transactions from the Land Use Act‟s consent provision. We further recommended that the courts give greater consideration to equitable principles in deciding mortgage disputes and refrain from literal interpretation of statutory provisions.

GENERAL INTRODUCTION

1.0.     Background of the Research

Crisis in the Nigerian banking industry has become a common phenomenon. It predates the country‟s independence.1 Nigeria began experiencing crisis in its banking industry in late 1940s and early 1950s during which period 25 banks failed. The country again witnessed another phase of bank failures between 1994 and 2006, during which a total of 49 banks failed. In 1998 alone,

26 banks failed.2

Similarly, in the year 2009, Nigeria again had another taste of banking crisis in which 8 banks were affected.3 The timely intervention of the Central Bank of Nigeria was able to salvage the condition of the affected banks and saved them from collapsing. The intervention involved the injection of N620 billion into the affected banks and the sack of management staff of some of the banks.4 In the year 2010, a total of 103 micro finance banks also went into liquidation while

83 others had their licences revoked in 2014.5  Also, in 2012, three banks had their licences

revoked by the Central Bank of Nigeria.6 As at date, a total of 48 deposit money banks and 187 microfinance banks are in liquidation.7

1 E. O. Nwosu, and A. S. Shekwogaza, “A Legal Interpretation of the Objects of Asset Management Corporation of

Nigeria”, 2014 J.I.B.L.R. 00, p. 239.

2 20 Years of Deposit Insurance in Nigeria: an NDIC Twentieth Anniversary Publication (1989 – 2009), (2009), p.

105–106. (This book did not disclose its publisher).

3 The affected banks include Afribank Plc, Unity Bank Plc, Bank PHB, Sring Bank Plc, Union Bank Plc

Intercontinental Bank Plc, Oceanic Bank Plc and Finbank Plc.

4 NDIC Annual Report & Statement of Accounts for the Year Ended December 31, 2010, pp 18 – 19.

5 J. Erunke,”CBN Lists 83 micro finance banks for liquidation”, (04 March 2014), available at

www.vanguardngr.com/2014/03/cbn-list-83-micro-finance-banks-liquidation/ (last accessed 08 August 2014).

6 The banks are Bank PHB Plc, Spring Bank Plc and Afribank Plc

7 See Appendices 1-3 for list of deposit money banks, micro finance banks and primary mortgage banks in liquidation in Nigeria.

These bank failures come with grave consequences on depositors, employees, creditors, shareholders and the economy. The former Governor of the Central Bank of Nigeria Sanusi Lamido Sanusi8 described the effect of bank failure on depositors in the following words:

Thousands of poor people, who have kept their life savings in the bank, lose it. Children‟s school fees, savings for retirement, medical bills, gone into thin air … How many people have died of heart attacks due to this tragedy? How many honest businessmen  have  been  rendered  bankrupt?  How many  people  have  committed suicide? How many have died because they were unable to pay medical bills as their monies were trapped in these institutions? How many children have dropped out of school? … We do not know? …

What we do know is that we have today, among those parading themselves as role models in society, people who profited from failed banks. Owners and managers who go on to become governors and senators. Bad debtors who are multi- billionaires, having taken the money belonging to those poor dead souls and not paid back.9

The last sentence of this quotation is the central issue around which this research revolves – instances where banks lend monies and are unable to recover them. This has contributed to the collapse of many banks and other financial institutions.

Lending is  essential  for  the growth  of any economy.  In  fact,  it  is  essential  for the continued existence of banks. This is because, given the nature of banking business, loans and advances  constitute the bulk  of their assets.  Paradoxically,  when  loans  are not  repaid  they become lethal to the banks instead of asset. Similarly, when loans are irregularly granted and their recoveries are impeded, they affect a bank‟s liquidity and throw the bank into distress. For

instance, a total sum of N178,918,430,000.00 was owed 45 banks in liquidation as at the date of

8 S. L. Sanusi, “The Nigerian Banking Industry: What Went Wrong and the Way Forward”, Being a paper presented at the Convocation Square, Bayero University, Kano, on Friday 26 February 2010 to mark the Annual Convocation Ceremony of the University.

9 Emphasis mine.

their closure. Hallmark bank alone was owed N29,716,740,000.00.10  As stated earlier, these

loans affect the banks‟ liquidity and cause crisis in the banking industry.

It  is  therefore  our  belief  that  an  indebth  understanding  and  effective  application  of prudent  mortgage11   principles  by parties to  loan transactions  can  mitigate the crises  in  the banking industry; a scourge which has remained a recurrent night mare in Nigeria.

1.2.      Statement of the Problem

One factor that has contributed to the collapse of banks in Nigeria is illiquidity, occasioned by the inability of banks to recover loans and advances they granted. Quite a sizeable number of these loans were secured with mortgages. In spite of the fact that these loans were secured, the banks were unable to recover them owing to various issues ranging from stiff resistance from the mortgagors to attempts to realize the mortgage security, location of mortgaged properties in rural areas, slow judicial processes, inability to locate mortgaged properties etc.

Ordinarily, a mortgage security is meant to serve as an assurance to a lender that if the borrower fails to repay his debt, the lender would have some collateral to fall back on and recover his money. Regrettably however, this has not been the case in Nigeria as banks have had their monies tied down in the hands of borrowers and are unable to recover such monies. In the year 2010, we had a total of 174 accounts with outstanding balances of N100 million and above being  debts  owed  to  banks  in  liquidation  in  Nigeria.  There  were  other  205  accounts  with

balances between N50 million and N100 million also being debts owed banks in liquidation.12

These translate to billions of Naira. In the same year 2010, a total sum of N178,918,430,000.00

10NDIC Annual Report & Statement of Accounts for the Year Ended December 31, 2012, pp. 36-37.

11 A mortgage is a legal or equitable conveyance of title as a security for the payment of debt or the discharge of some other obligations for which it is given, subject to a condition that the title shall be reconveyed if the mortgage debt is liquidated. See Santley v. Wilde (1899) Ch. 474.

12 NDIC Annual Report & Statement of Accounts, loc. cit. note 4, p. xix.

was owed 45 banks in liquidation as at 31st  December 2010. Only N21,765,220 000 had been recovered as at that date13.

It is worthy of note that 32 of these 45 banks were closed between the year 1994 and

1998 while the remaining 12 were closed between the year 2000 and 2006. The point being made is that these debts were not recovered during the subsistence of these banks and have still not been recovered after over a decade since the banks went aground.

Also worrisome is the fact that most of these loans were secured. Yet their recoveries have become a nightmare to the liquidators. It is common to find a bank having serious liquidity problems because a lot of its money is trapped in non-performing loans. It is this state of affairs that has pre-occupied the mind of the writer.

This work is a search to unravel the factors that have impeded the realization of the objective of a mortgage – a buffer against the inability of a debtor to repay his debt; an assurance to a lender of the recovery of his money.

1.3.    Objectives of the Study

The objectives of this study are to:

1.   Identify and proffer solutions to the problems associated with recovery of mortgage debts in Nigeria with a view to enhancing debt recovery by banks to boost their liquidity and stem crisis in the banking industry.

2.   Show that the current judicial process has not aided recovery of mortgage debts.

3.   Establish that the provision of the Land Use Act which requires Governor‟s consent to

mortgage transactions is not healthy for credit transactions.

4.   Examine the impact of non-performing loans on the banking industry and the economy.

13Ibid., pp. 18-19.

1.4.    Research Questions

This study seeks to provide answers inter alia to the under-listed questions:

1.   Whether there are challenges confronting banks in their efforts to recover mortgage debts and how the challenges (if any) can be addressed?

2.   Whether there is a correlation between the incessant crises in the Nigerian Banking

Industry and application of prudent mortgage principles?

3.   Whether the Nigerian judicial process has facilitated recovery of debts owed banks?

4.   Whether the Land Use Act‟s requirement of Governor‟s consent to mortgage transactions

has been healthy for the banking industry?

1.5.    Significance of the Study

This work is significant because it addresses a real issue in our society. It seeks to stem bank failures occasioned by inability to recover loans granted to borrowers. The study sets out to ensure that banks and other financial institutions avoid the pitfall of giving out loans without ensuring that necessary mechanisms are put in place to ensure repayment of such loans.

The study considers recent developments in the law of mortgages in Nigeria. It is a useful material for banks and other financial institutions engaged in the business of lending. It is also a useful literature for bodies engaged in debt recovery activities like Asset Management Corporation of Nigeria (AMCON), Nigeria Deposit Insurance Corporation, legal practitioners and other debt recovery agents.

This work is also useful to members of the Bench and the academia as it touches on issues that come before the courts on regular basis and affect our daily lives.

1.6.    Literature Review

Campbell and Cartwright considered the problem of banking crisis and stated that bank failures can have serious effects beyond the confines of the troubled bank.14    They agreed with Davies that bank failures have a far greater potential to create collateral damage and produce victims who may have had no dealings with the failed institution in question.15  The authors stated that unlike the failure of a manufacturing business which may be beneficial to its competitors, the failure  of  a  bank  could  directly affect  other  banks  as  a  result  of  interconnecting  financial transactions among banks. It could also lead to loss of confidence not only in the troubled bank but also in other banks which could result in bank runs. The authors noted further that banks are at the centre of the international payment system which makes the efficient working of the payment system of great importance to governments.16  The authors also discussed the history and causes of bank failures in Europe, Australia, Asia and America. They equally discussed the regulation of banks in England as well as the role of the Bank of England in a banking crisis.

This book is a useful literature in discussing banking crisis. However, the book is concerned with the ways in which the law seeks to protect likely victims of bank failures in England and Wales. It has no direct application to Nigeria which is the main focus of our study.

In the same vein, Nwosu and Shekwogaza,17  stated that banks play the critical role of

financial  intermediation  in  the  economy  by  mobilizing  financial  resources  from  surplus economic units for on lending to deficit units. Consequently, any negative occurrence in the banking industry would likely have ripple effects in the economy.18  The authors reviewed the

achievements of the Asset Management Corporation of Nigeria (AMCON), its relationship with

14 A. Campbel and P. Cartwright, Banks in Crisis: the Legal Response, (England: Ashgate Publishing Company,

2002), p. 1.

15 H. Davies, Financial Services Press Release, London 01 January 1999; cited by Campbel and Cartwright, ibid.

16 Campbel and Cartwright, op. cit., note 14.

17 Nwosu and Shekwogaza, loc. cit., note 1.

18 Ibid.

other safety net participants, its objects, as well as its contribution in stabilizing the Nigerian Banking Industry.  However, while the authors‟ work focused on examining inter alia the objects and achievements of AMCON, the present study seeks broader ways of enhancing recovery of debts owed banks.

Lamenting the impact of non-performing loans on the banking industry, Ogunleye stated that it is a paradox that lending which is the core business of banking has become the bane of many banks. He attributes this paradox to a combination of factors which include non-adherence to canons of good lending, poor documentation, weak collateral protection, poor borrowing culture and difficulty in enforcing creditor rights. 19

To reduce incidence of loan defaults therefore, Holden discussed the canons of good

lending extensively. These are factors that a bank should examine and find satisfactory before giving out an advance. The principles of good lending according to Holden include capacity and character of the borrower, purpose, profitability, duration and availability of collateral for the advance. Although Holden admitted that the realization of securities is sometimes a lengthy, costly and complicated business, he did not discuss the challenges associated with realization of

securities which is one of the major focus of the present study. 20

According to  Smith, banks and other financial  institutions provide the tonic for the vigorous  commercial  activities  through  lending.  The  provision  of  credit  facilities  is  an investment for banking and a method of financial undertaking which propel economic growth. 21

He stated further that the risk of non-repayment of loan is minimized when the debtor provides

an alternative means to fall back on in the event of default to repay.22 That by reducing the risk,

19 G. A. Ogunleye, Perspectives on the Nigerian Financial Safety-Net, (Adolness Nigeria Limited, 2010), p. 7. (This book did not disclose its place of publication).

20 J. M. Holden, Securities for Bankers’ Advances, (5th edition, London: Pitman Publishing, 1971), p. 1.

21 I. O. Smith, Nigerian Law of Secured Credit, (Lagos: Ecowatch Publications (Nigeria) Limited, 2000), p. 1.

22 Ibid. p. 2.

security reduces the cost of credit by reducing the interest payable. Stressing the need to ensure repayment of loans, the author states that it is necessary for repayment of loans to be assured so that the banks may stay afloat and able to make fresh advances to other customers in need of finances.23

One can safely regard mortgages as the most popular and universally recognizable means

of securing credit transactions. Relying on Lord Lindley MR,24  Smith defined mortgage as a legal or equitable conveyance of title as a security for payment of debt or discharge of some other obligations for which it is given, subject to the condition that the title shall be reconveyed if the mortgage debt is liquidated. According to the author, the substance of a mortgage of land (as well as mortgage of other form of property) is a right of property vested in the mortgagee which entitles the later by virtue of this title to have the rents and profits applied to satisfy his debt, and upon default by the mortgagor to liquidate the loan, to enforce the security by sale or foreclosure.25

Smith‟s work is broad in scope; it is not restricted to land mortgages. It goes on to discuss

mortgage of personal chattels, ship, shares, life insurance policy etc. The author discusses means of realizing all these securities. Smith‟s work shares some common features with the present work in terms of scope as the present work is also not limited to land mortgages but also discusses other subject-matters of mortgages. However, Smith did not reckon with the practical challenges that impede the exercise of mortgagees‟ rights. The present study recognizes that realization of mortgage securities poses serious challenges to mortgagees and seeks means of ameliorating the challenges. Furthermore, Smith‟s discussion on mortgage of ships was based on

the repealed Merchant Shipping Act of 1962. This statute was repealed in 2007. The extant

23Ibid. p. 3

24 Santley v. Wilde above, at note 11.

25 NDIC Annual Report & Statement of Accounts, loc. cit. note 4, p. 35.

legislation is the Merchant Shipping Act, 2007.26  The extant Act contains significant improvements.  For  example  minister‟s consent  was  required  to  mortgage  a  ship  under  the repealed Act. This requirement does not exist under the extant Act. This work therefore discusses mortgage of ships under the current Merchant Shipping Act. The discussion therefore reflects the current position of the law in this regard.

According  to  Chianu,  individuals  and  corporate  moneylenders  desire  to  recover  the money they lend. Consequently, most of them insist on something to assure them that on the borrower‟s default they would not have lost their investment. The author cautioned the courts‟ sympathy for mortgagors and warns that the graciousness of equity to the mortgagor should not be extended too far because mortgagees are in credit business which is at the roots of the economy. As such, any harm done to them under the guise of mistaken kindness to mortgagors

can crumble the economy irrecoverably.27

Chianu stated further that foresightful lenders prefer real security which elevates the creditor to the status of a secured creditor, giving him something out of which he is entitled to have his debt paid in preference to the unsecured creditor. He identified land as the chief source of security for lending in the banking and informal sector and proceeded to focus his discussion on land mortgages. He considered the laws guiding creation of mortgages in different parts of Nigeria. He examined the provisions of the Land Use Act that have bearing on mortgages.

Contrary  to  Smith‟s position,28   Chianu  stated  that  land  in  non-urban  areas  can  be

mortgaged.29 We do not agree with Chianu on this issue. In view of the provisions of the Land

26 Cap. M11, LFN 2004.

27 E. Chianu, Law of Securities for Bank Advances (Mortgage of Land), (2nd edn., Benin City: Ambik Press, 2004), p. 143.

28 Smith, op. cit., note 21, p. 43.

29 Chianu, op. cit., note 27, p. 40.

Use Act,30  Smith‟s position that land in non-urban areas cannot be mortgaged31  is the correct position of the law.

Chianu also examined the validity of sale of mortgaged property by the mortgagor while the mortgage is still subsisting. He concluded that a purchaser from the mortgagor steps into the shoes of the mortgagor with regards to the obligation to repay the mortgage loan. He discussed the mortgagee‟s power of sale and asserted that a mortgagor cannot restrain a mortgagee from selling the mortgaged property even when he (mortgagor) is disputing the amount of the debt. He has to first pay to the mortgagee or into court the amount being claimed by the mortgagee before he can secure an injunction to restrain the mortgagee from selling the mortgaged property.

Chianu went on to analyze the consent provision of the Land Use Act and concluded on that point that loans secured by mortgages that were created without obtaining the Governor‟s consent can still be recovered using legal apparatus. This, according to him, is because the loan transaction is distinct from the mortgage transaction concluded in respect of the loan. He explained that both transactions are governed by different laws. While the loan transaction is in the realm of the law of contract, property law governs the mortgage that serves as an assurance to the lender. This argument is plausible. If for instance a mortgage instrument is invalidated for any reason, the lender should be able to bring an action to enforce the covenant to repay the loan. If the lender obtains judgment, he should be at liberty to execute the judgment against any property of the debtor (mortgaged property inclusive) to recover the judgment debt.

Also Commenting on the Land Use Act‟s requirement of Governor‟s consent to mortgage transaction,  Umezulike  opined  that  mortgage  transactions  should  be  exempted  from  the

requirement  of  Governor‟s consent  because  of  the  importance  of  mortgages  to  the  overall

30 S. 36(5)-(6).

31 Smith, op. cit., note 21, p. 43.

economic life of the nation.32   We share Umezulike‟s view on this point. Removal of mortgage transactions  from  the  requirement  of  Governor‟s consent  would  greatly  enhance  mortgage transactions.

Still on the requirement of Governor‟s consent to mortgage transactions, Akujobi opined that the Governor can be compelled to give consent to alienation of land. That the discretionary powers of the Governor to grant consent is coupled with a duty on the Governor to exercise his discretion in favour of the citizens, especially where the applicants have satisfied the conditions laid down by the Governor for the grant of his consent.33  He contended that while a Governor may refuse his consent for reasons consistent with the Act, he has no absolute power to refuse an application for consent. That once the application is submitted and the conditions set by the Governor for the grant of consent are satisfied, it is the duty of the Governor to consider the application and grant the request for consent.34 There is merit in this argument. There should be some measure of checks on the discretion of the Governor to refuse consent to alienation of land.

Oluyede, stated that mortgage under the general law is by no means without complications.35 He quoted per Lord Macnaghten in Samuel v. Jarrah Timber and Wood Paving Corp36  that “no one … by the light of nature ever understood an English mortgage of real estate”.37  The author identified two types of mortgages under the general law, namely: legal mortgages  and  equitable  mortgages.  He  discussed  requirements  of  a  mortgage  to  include

capacity of parties, state requirements as well as stamping and registration. The author also

examined methods of creating legal mortgages in Nigeria. He concluded his discussion on the

32 I. A. Umezulike, “Ammel O. Ajilo v Savannah Bank of Nigeria Ltd, Suit No. ID/442/85” 1986 2 I.U.L.R., p. 39.

33 O.R. Akujobi, The Land Use Act, Twenty Five Years After, I. O. Smith, (Lagos: Folar Prints, 2003), p. 198.

34 Ibid.

35 P. A. O. Oluyede, Nigerian Conveyancing Practice, Drafting and Precedents, (Lagos: Heineman Educational

Books (Nigeria) Plc, 1994), p. 141.

36 (1904) AC 323.

37 Ibid.

right of a legal mortgagee to take possession of the legal mortgage by stating that if a mortgagee remained in possession of the mortgaged land for twelve years without acknowledging the mortgagor‟s title or receiving any payment of principal or interest from him, the right to redeem the land is extinguished and the mortgagee will acquire a title to the land according to the different limitation statutes operating in Nigeria. Oluyede‟s work is quite instructive on the traditional principles of mortgages. However, it does not contain recent developments in the law and practice of mortgages having being written two decades ago.

Cousins cautioned the effort of a mortgagee to recover the mortgage debt by taking possession of the mortgage property. The author stated that the mortgagee‟s security does not depend on being in possession. If he wishes to apply the rents and profits to the satisfaction of the mortgage debt, his remedy is to appoint a receiver. He cannot derive any personal profit from being in possession. Indeed he is accountable to the borrower not only for the profits which he does make but also for those which he reasonably ought to have made.38

Aluko traced the history of mortgage to ancient times when people in need of money used to approach rich people for financial assistance and personal effects or immovable assets were offered as securities for repayment of the money borrowed. He further states that due to the high rates of interests charged by moneylenders, legislation had to be passed by many governments to fix interest rates. The author also examines the implication of alienation of mortgaged  property  by  the  mortgagor  and  concludes  that  anybody  who  buys  a  mortgaged property from  the mortgagor when  the deed  of legal  mortgage  is  still subsisting takes  the

property subject to the right of the mortgagee. The author distinguished legal mortgage from

38 E. F. Cousins, The Law of Mortgages, London: Sweet & Maxwell Limited, 2001, p. 3.

equitable mortgage. He states that unlike an equitable mortgagee, a legal mortgagee can sell the mortgage property without an order of court.39

Okany, discussed the modes of creating mortgages in different parts of Nigeria prior to the enactment of the Land Use Act. The author proceeded to identify the material differences between English mortgages and customary pledges. He stated that unlike that of a customary pledge, the right of the mortgagor to redeem is subject to the mortgagee‟s power to sell the property or to foreclose the mortgage. The author also considers the effect of lapse of time on the

mortgagor‟s equitable right to redeem.40

Bray traced the development of mortgages at Common Law and Equity. She discussed four ways in which equity has attempted to protect the mortgagor. These include protecting the equitable  right  to  redeem,  striking  down  oppressive  interest  rates,  preventing  rates  and preventing unfair collateral advantages. She further considered priority of mortgages and concluded that priority of mortgages is governed by two factors, namely, whether the mortgages are legal or equitable and whether the title to the property is registered or unregistered. While this work is very concise and educative on general principles of mortgages, it does not reflect

local circumstances peculiar to Nigeria, being a foreign text. 41

Harpum42  regarded a mortgage as the most important kind of security for a loan. The author distinguished a mortgage from a lien, pledge and a charge.   The author discussed the rights of parties to a mortgage transaction under three heads, namely, the rights of the mortgagee, the rights common to both parties and the rights of the mortgagor.43

Burn traced the origin of the equitable right to redeem. He stated further that equity of

redemption arises as soon as the mortgage is created and is an equitable interest owned by the

39 O. Aluko, The Law of Real Property and Procedure, (2nd edn., Ibadan: Bright Star Publishers Nigeria Ltd, 2001), p. 112.

40 M.C. Okany, Nigerian Law of Property, (2nd edn., Enugu: Fourth Dimension Publishing Co. Ltd., 2000).

41 J. Bray, Key Facts Land Law, J. Martin & C. Turner (2nd edn.), p. 74.

42 C. Harpum, The Law of Real Property, (6th edn., London: Sweet & Maxwell, 2000), p. 1169.

43 Ibid.

mortgagor. It is an interest in land which may be conveyed, devised or entailed, and it may descend on intestacy or pass as bona vacantia to the crown. It is destructible only by four events, namely, its release by the mortgagor, the lapse of time under the limitation Act, the exercise by the mortgagee of his statutory power of sale and a foreclosure decree.44 This author uses the term “equity of redemption” and “equitable right to redeem” interchangeably. This is not correct. They are separate and the distinction between them is clearly highlighted in this work.

This present study has some distinguishing characteristics from the literature reviewed above. It identified the nexus between non-performing loans and bank failures. It then sought means of enhancing debt recovery by utilizing mortgage transactions. The study attempted to ameliorate bank failures using the instrumentality of mortgages. To achieve this objective, this work not only discussed the theory of mortgages. It examined the operation of mortgages in practice. It not only discussed the remedies available to parties to mortgage transactions. It recognized that in practice, there are serious challenges in recovering mortgage debts through realization of mortgage securities. It then set out to identify these problems and proffer solutions to them.

The present work also takes into account recent developments in the banking industry. It discussed the recent global financial crisis and its impact on many economies as well as the role of non-performing loans and failed mortgage transactions in the crisis. The author knows no research that is patterned in this manner.

1.7.     Research Methodology

The  methodology adopted  in  this  research  is  doctrinal.  Reliance  is  placed  on  primary and secondary source materials. The primary materials include statutes and regulations while the

44 E. H. Burn, Modern Law of Real Property, (13th edn., London: Butterworths & Co (Publishers) Ltd, 1982), p.

618.

secondary materials include case law, text books, journals, articles, reports of regulatory bodies, existing research works, workshop papers, newspapers, magazines and internet material.

1.8.     Scope of Study

This work is limited to mortgage security. It does not extend to other forms of securities like lien, guarantee,  pledge  etc.  Any reference to  other  forms  of security is  with  a view to  making comparisons.

Similarly, the focus of this work is on deposit money banks and banks in liquidation. Micro Finance Banks fall outside the scope of this work. This is because micro finance banking is in its formative stage in Nigeria. Consequently, getting sufficient information on activities of micro finance banks from a centralized source is difficult.

1.9.       Organization of Chapters

This research was divided into seven chapters. Chapter one gave a background of banking crises in Nigeria and highlighted the motivations, objectives, scope and significance of the research. The questions that the research set out to answer as well as the methodology it adopted were all outlined in the Chapter. Chapter two examined the canons of good lending. These are factors that a lender should consider and find satisfactory before giving out an advance.

Chapter three examined the different legislation that have bearing on mortgage transactions. Mortgage security was also compared with other forms of securities in the same chapter. Chapter four discussed subject-matters of mortgages. These are properties that can serve as security in mortgage transactions. Chapter five considered the rights and obligations of parties to mortgage transactions. Furthermore, Chapter six reviewed banking crises in different parts of the world and the role of non-performing loans in majority of the crises. Finally, Chapter seven ended  the  research  with  recommendations  on  findings  that  were  made  and  a  conclusion.

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