offset
Offset is when a bank or lender uses money you have in one account to calmly settle a debt you owe in another, without asking you first.
In plain English
Remember the day the light went out and the woman selling akara at the junction still had your ₦2,000 balance in her small notebook from last week, so when you came to buy again, she simply crossed it out against what you owed and told you your new total.
You did not hand her the ₦2,000 in cash. She just adjusted her book. That crossing out, that calm settling of one account against another, is exactly what offset means in banking, except the bank is the one holding the notebook, and the notebook is your accounts.
In Nigeria, offset shows up when someone takes a loan from a bank, say GTBank or Zenith, and also keeps a savings account with the same bank. If the person defaults or falls behind on repayment, the bank has the legal right to reach into that savings account and use the money sitting there to reduce or clear the loan, often without a phone call first.
In the United Kingdom, offset mortgages are actually sold as a feature, not a punishment. Someone with a mortgage and a savings account at the same building society can link both, so the savings balance reduces the amount of interest charged on the mortgage each month, which is a friendlier, invited version of the same idea.
For the person abroad sending money home, this matters if you keep multiple accounts at one Nigerian bank, perhaps a domiciliary account and a naira savings account. If a loan attached to one of those accounts goes bad, the bank's right of offset can mean funds move between accounts even while you are asleep in London, and you only find out when you check your balance the next morning.
The lesson is simple. Read what you sign, because that clause about the bank's right of offset is usually sitting calmly in the fine print, waiting.
Chidi has ₦300,000 in his savings account and owes ₦250,000 on a personal loan from the same bank. He misses two repayments. The bank exercises its right of offset, takes ₦250,000 from his savings to clear the loan, and he wakes up to find only ₦50,000 left in an account he thought was untouched.
Questions people ask
Can a bank offset my account without telling me first?
In most cases, yes, because the right of offset is usually written into the loan agreement you signed, and the bank does not need fresh permission each time to act on a term you already agreed to.
Does offset only apply to loans, or can it apply to other debts?
It mainly applies to money you owe the bank itself, such as loans, overdrafts or credit cards, not to unrelated debts you owe other people or companies.
How can I protect my savings from being offset?
Keep loan accounts and savings you never want touched at different banks, and always ask your bank directly whether an offset clause exists before you sign any loan agreement.
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