Abstract

There have been different reasons proffered by scholars for the failure of banks in Nigeria. One of the reasons, according to the Honourable Justice Alooma Murktar (CJN) and corroborated by the Chartered Institute of Bankers of Nigeria, is “poor documentation.” That submission suggests different things to different professionals. It may simply mean poor record keeping by the banks of their books. It may as well include, as considered in this paper, proper compliance with the requirement of section 22 of the Land Use Act, 1978. The section provides that before a mortgage, among other means of alienation of title in land, could be created on land related property the mortgagor must first obtain governor’s consent. Failure to comply with the requirement of section 22 renders the mortgage void as provided in section 26 of the Act. In effect, the law renders an entire mortgage transaction that does not comply with section 22 of the Act non-existent and therefore unenforceable. The effect of failure by the banks to comply with the provisions of the Land Use Act, it is conceded, amounts to poor documentation. But beyond that this paper considers the role of the court in salvaging bad situation of documentation in order to avoid throwing both the baby and the bath away. The issue of poor documentation has been manifested mostly in mortgage default cases over the years and it appears that our laws have not helped matters. In fact, it is not far from the truth to say that the Land Use Act 1978 is the foundation of the problem of mortgage default in Nigeria. Complying with the provisions relating to section 21 of the Act has been acknowledged even by the court as one that breeds hardship in the circumstance of what it takes to obtain governor’s consent in land registries in Nigeria. Yet it would appear the court has abstained from remedying this precarious circumstance that makes the provision inimical to national economic development. The tenor of the court’s interpretation over the years since the locus classicus case for the interpretation of the sections in Savannah Bank v Ajilo is: where a bank gives a loan to and the borrower (mortgagor) creates a mortgage in its favour without first approaching the land registry to obtain governor’s consent to mortgage the property, the bank will not be allowed, where the lender defaults in repayment, to recover the loan with the purportedly mortgaged property. It goes without saying that if banks in such circumstances lose their funds to bad loans they definitely will continue to fail unless they have better options other than land related property security for loan facilities they give. This paper re-appraises the position of the court on the interpretation of the LUA sections in relation to mortgage defaults and shows through a chronological analysis of cases on mortgage that the court has somehow shot out the principles of equity in that regard. The paper discusses the relationship between law and economics, relating the decisions of the courts to the economic development or otherwise of the country and recommends that the courts should help the country move forward by making good use of principles of equity as obtain in some other developed common law jurisdictions.