The Central Bank of Nigeria introduced the Global Standing Instruction (GSI) in July 2020, aiming to combat non-performing loans by enabling commercial banks to automatically recover overdue debts from any account linked to a defaulter's Bank Verification Number (BVN). This framework, however, permits recovery only of the principal and accrued interest, explicitly excluding outstanding fees. A recent High Court ruling in Lagos, Nigeria, has brought the application of this mechanism under intense scrutiny, highlighting critical questions about its implementation and compliance.

On February 12, 2026, the Lagos High Court delivered a judgment against Fidelity Bank in a civil suit filed by Esther Agboola. Agboola’s lawsuit, initiated in April 2025, accused Fidelity Bank of violating her fundamental right to data privacy by processing her account details to offset an unverified loan. At the time of the incident, Agboola, a student, discovered that ₦11,922.41 had been debited from her savings account without her authorization. Upon inquiry, she was informed by Fidelity Bank’s customer care that the debit was an automatic loan recovery, despite her assertion that she had never obtained a loan from the financial institution implicated. Facing the bank's refusal to refund the amount, Agboola pursued legal action.

Fidelity Bank, represented by legal counsel David Etim, argued that its actions were consistent with applicable banking laws and the GSI framework, having received a GSI trigger via the Nigeria Inter-Bank Settlement System (NIBSS) indicating an outstanding debt owed to NIRSAL Microfinance Bank. However, the court found Fidelity Bank's defense lacking, specifically noting its inability to produce a GSI mandate signed by Agboola or any loan agreement that linked her to NIRSAL Microfinance Bank. Consequently, the court awarded Agboola damages of ₦2,000,000 ($1,488.6) and an additional ₦300,000 ($223) to cover legal costs, a significant victory for her, though less than the ₦50,000,000 she had initially sought.

This ruling carries profound implications for Nigeria's financial system, exposing a tension between the CBN’s GSI guidelines and existing data privacy laws. A core principle of the GSI framework is the requirement of a GSI mandate, a document that borrowers must sign alongside a loan agreement, expressly authorizing financial institutions to initiate loan recovery. The guidelines explicitly state that this mandate must be signed upon loan receipt and fully understood by the customer. Without such a mandate, any attempt at GSI-based loan recovery is illegal and can lead to severe penalties from the CBN. Olumide Babalola, Agboola's counsel, emphasized that while the GSI framework might not oblige institutions to verify every lender's claim, it fundamentally presupposes a valid and enforceable GSI mandate, which was absent in this case.

The incident further highlights vulnerabilities within the GSI system, particularly the mandate for Participating Financial Institutions (PFIs) to honor every GSI trigger received, or face penalties like a ₦100,000 fine per incident. This "blind compliance" mechanism offers little room for banks to independently verify the credibility of a trigger, despite the GSI framework's indemnification of NIBSS and PFIs by the creditor bank against liabilities from inappropriate GSI use. Babalola argues that this regulatory demand makes the process susceptible to abuse and leaves account holders vulnerable to unlawful debits.

Experts suggest several possible reasons for the anomaly and potential complicity. Yvonne-Faith Elaigwu, Head of Operations at OnePipe, pointed out that Fidelity Bank holds the responsibility for correctly tagging all accounts with the appropriate BVN on the NIBSS system. An incorrect BVN tagging, leading to an erroneous debit, would render the bank liable. Other possibilities include internal fraud, a recurring issue in the banking sector, or errors originating from the loan disbursement process itself. The loan in question was part of the COVID-19 Targeted Credit Facility Intervention Scheme, where due diligence was often expedited or omitted. NIRSAL Microfinance Bank, serving as a vehicle for these government-backed emergency loans, likely failed to secure proper GSI mandates during disbursement, making subsequent recovery attempts illegal for numerous borrowers. Moreover, the prevalence of no-collateral loans, easily accessible with just a BVN and phone number, creates avenues for identity theft, where a third party could have used Agboola's identity, causing the GSI system to erroneously link the debt to her BVN.

Despite the challenges exposed, Adedeji Olowe, Founder and CEO of Lendsqr, views the judgment not as a setback for the GSI but as a crucial step towards strengthening its governance. He asserts that the ruling does not invalidate the GSI's lawfulness but rather clarifies the distinction between its legitimate use and misuse. The judgment affirms that banks cannot rely solely on automation and must demonstrate the legality of any debit, reinforcing their accountability for errors. This outcome, therefore, is seen as a positive development, encouraging banks to implement stronger controls, audit trails, and robust dispute resolution processes, ultimately ensuring the GSI framework operates with greater integrity and fairness.