Nigeria: "Is A Terminated/Dismissed Worker Obliged To Repay Staff Loans?"

Last Updated: 3 December 2018
Article by Perchstone & Graeys

It is not unusual for employers to provide loan schemes for employees for the purpose of acquiring properties or undertaking personal projects. In most cases, these loans are structured in a way that the principal and interest are periodically deducted from the employees' salaries or entitlements until the loan is fully repaid. In other words, the loan facility is secured by the salaries of the employee and is largely premised on the employee remaining in the employment of the employer. Where the employer forces the employee to resign, thereby eliminating the means by which the employee was expected to repay the loan, can the employee still be obligated to repay the loan?

The National Industrial Court ("the Court") had an opinion on this in the recent case of Mrs. Vivien Folayemi Asana v. First Bank of Nigeria Ltd.


Mrs. Vivien Folayemi Asana ("Mrs. Asana") was employed by First Bank of Nigeria Limited ("the Bank") in 2007 as a Manager, and subsequently promoted to a Principal Manager. She claimed that during her employment, she maintained a record of excellent performance which informed her several promotions, and never had any disciplinary issues with the Bank. However, on 22nd January 2016, Mrs. Asana was compelled to tender her resignation letter, with her official e-mail account disabled on the same day. Thereafter, Mrs. Asana and her solicitor wrote separate letters to the Bank challenging the manner in which she was forced to resign, and requested for her re-instatement. The Bank simply demanded for the settlement of the welfare loan made available to Mrs. Asana during her employment, and communicated its intention to convert the loan to a commercial loan at the prevailing commercial interest rate. Mrs. Asana was of the view that by forcing her to resign, the Bank frustrated the repayment plan of the loan advanced to the claimant. Consequently, she claimed, amongst other reliefs:

  1. A declaration that the purported and/or induced letter of resignation dated 22nd January 2016 and signed by her under duress is invalid and unlawful.
  2. A declaration that her employment with the Bank still subsists.
  3. A declaration that the Bank cannot convert her welfare loan to a commercial loan and run at the prevailing commercial interest while she was still challenging her forceful resignation from the Bank.
  4. An order directing the Bank to reinstate and/or recall her to her duty post or employment and allow her to enjoy all benefits attached to the claimant's status.

In response, the Bank argued that Mrs. Asana was never forced to resign, and that her resignation was a consequence of her poor performance within the financial year. The Bank therefore counterclaimed against Mrs. Asana as follows:

  1. Judgment in the sum of N17,388,772.09 (Seventeen Million, Three Hundred and Eighty-Eight Thousand, Seven Hundred and Seventy-Two Naira and Nine Kobo) owed to the Bank by Mrs. Asana with respect to the loan facility extended to her.
  2. Interest and Cost of the action.


After a careful review of the submissions of both parties, the Court approached the issues under the following subheads:

  1. Constructive dismissal: Mrs. Asana's resignation letter stated thus: 'Further to the request that I should resign, by Management of First Bank of Nigeria Ltd. I hereby tender my letter of resignation' . The Bank on its part, argued that Mrs. Asana was advised to resign based on her poor performance, and instead of having her appointment terminated, she decided to resign her appointment. To the Court, that was a classic case of constructive dismissal/discharge; any attempt to have an employee resign, rather than outrightly firing the employee means that the employer is trying to create a constructive discharge and for which a case of constructive dismissal is made.
  2. Time of resignation: For a claim for constructive dismissal/discharge to succeed, the claimant must have resigned so soon after the employer's act. Thus, Mrs. Asana's resignation three days after the Bank's request was not too long as to invalidate her claim of constructive dismissal.
  3. Re-instatement: On Mrs. Asana's claim for a declaration that her employment subsists, the Court held that the exact legal consequence of a constructive dismissal is that it leads to the employee's obligations ending, and the employee acquiring the right to seek legal compensation against the employer. As such, upon her resignation/constructive dismissal by the Bank, the employment relationship ceased to exist.
  4. Claim for staff loans: Employment contracts and personal loans between an employers and employees are two distinct contracts having distinct subject-matters, and the existence of the employment cannot operate as a condition precedent to the repayment of the personal loan or balance thereof. In the circumstances however, a constructive dismissal is double jeopardy to the employee and double advantage to the employer (the loss of employment, and the conversion of a low interest rate staff loan to a commercial loan with higher interest rate). To the Court, this is not just inequitable but most unjust. In view of the foregoing, the Court held that the Bank cannot be entitled to anything beyond the N10,392,598.54 outstanding on the loans availed to Mrs. Asana in the course of her employment.

Other matters

  1. Retirement age: Except where it is expressly stated in the employment contract, an employer does not guarantee a job to an employee until the employee's retirement age. In other words, the time stipulated for retirement only sets out the maximum duration possible for the employment under the existing contract. Consequently, the Court cannot grant a claim for payment of salary up to the retirement age as claimed in this case.
  2. Claim for unearned allowance: A party cannot be allowed to benefit from its own wrong. Thus, the fact that the Bank constructively dismissed Mrs. Asana means that it cannot lay claim to any unearned allowances it paid to the claimant, given that the retirement was involuntary. This is because, if not for the constructive dismissal, she would have remained in the Bank's employment, there would have been no duty to repay the unearned allowances.


The NIC has, in a plethora of cases, defined constructive dismissal as a situation where an employee resigns because his/her employer's conduct has become intolerable or heinous to the extent that the employee has no choice but to resign. It includes situations where an employer asks an employee to resign or creates such working conditions (or so changes the terms of employment) with a view to forcing the employee to resign.

Whilst constructive dismissal is generally wrongful and amounts to unfair labour practice, it does not, in any case, diminish the employer's obligation to repay staff loan availed to him/her in the course of the employment. The Supreme Court gave credence to this position in the case of Lewis v. UBA (2016) LPELR-40661(SC) when it held that the Bank (employer), having fulfilled its obligation in the loan contract by providing the funds, the next step is the obligation for repayment by the employee, which does not cease just because the employment ended. This is because mere hardship, inconvenience or other unexpected turn of events which have created difficulties, though not contemplated, cannot constitute frustration to release the employee from that obligation.

Granted, staff loans are often premised on deductions from the employee's salaries. However, notwithstanding that a constructive dismissal alters the course of events, the obligation to repay the staff loan survives the termination. At best, an employee who was forced to resign can institute an action for damages for constructive dismissal.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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