What is escrow and how does it work in Nigeria? A plain guide with naira examples

Every Nigerian has heard a version of this story. "I paid, he did not deliver." Or from the other side: "I did the work, she refused to pay." Escrow fixes the trust gap in the middle. This guide explains how it works, where Nigerians use it, what it costs, and how to avoid fake escrow.

What is escrow?

Escrow is an arrangement where a neutral third party, called the escrow agent, holds money for two people who do not yet trust each other. The money is released only when an agreed condition is met.

A legal guide from Pavestones, published on Legal 500 in June 2024, describes the escrow account as a temporary holding account managed by the escrow agent that cannot be accessed by either the buyer or the seller (Legal 500, 4 Jun 2024).

Think of it like a trusted uncle holding the money at a family land sale. The difference is that a proper escrow service writes the rules down and keeps records.

How does escrow work, step by step?

1. Agree the deal. Buyer and seller (or employer and worker) agree what will be delivered, the price and the condition for release. For example, "release when the bathroom tiles are laid and inspected".
2. Buyer pays into escrow. The money goes to the escrow agent, not to the seller.
3. Seller sees the money is held. The seller now knows the buyer is serious and the money exists.
4. Seller delivers. Goods are sent, or work is done.
5. Buyer checks and confirms. The buyer inspects and confirms the goods or work are as agreed.
6. Escrow releases the money. The agent pays the seller, minus any agreed fee.
7. If there is a problem, either side raises a dispute. The money stays held until the dispute is decided under the agreed rules.

The key point is step 2. The person who has to deliver never touches the money until the condition is met. The person paying never has to "just trust" a stranger.

Why does escrow matter so much in Nigeria?

Because paying up front is risky, and fraud is large. Nigerian financial institutions reported ₦52.26 billion lost to fraud in 2024 according to NIBSS (Nairametrics, Feb 2025). A CBN document reported by Nairametrics shows e-commerce fraud incidents rose by 1,961% in 2023, and total fraud losses reached ₦134.48 billion between 2020 and 2025 (Nairametrics, Jun 2026).

Most of the work Nigerians pay for is informal too. About 93% of employed Nigerians were in informal work in the second quarter of 2024, according to the NBS (Nairametrics, Nov 2024). There is usually no company, contract or office behind the artisan or vendor. Escrow gives both sides a fair structure where there was none.

How is escrow used in Nigeria?

Escrow for land and property

Buying land or a house is where Nigerians lose the biggest sums. Common uses of escrow here:

• A buyer's lawyer holds the purchase money until the title search is done and the documents are signed.
• Buyers paying for off-plan homes ask for money to be released to the developer in stages as building progresses.

Off-plan buying is where the risk shows most. A Nairametrics investigation in July 2025 found Lagos buyers waiting months or years past promised dates. One buyer paid about ₦1.2 million for two plots in Ibeju-Lekki, finished paying by May 2025 and had still not been allocated land months later. Another paid ₦38 million to ₦40 million for a flat promised by the end of 2022 and received it at the end of 2024 (Nairametrics, 29 Jul 2025).

In July 2026, the Minister of Housing and Urban Development proposed regulated escrow arrangements for off-plan housing, alongside mandatory developer licensing. No draft had been published at the time, and experts warned that escrow controls where money is held but not what it builds, so they want money released in stages tied to verified construction (Nairametrics, 26 Jul 2026). That is good advice for any buyer today: escrow plus staged release plus your own checks.

Escrow for online buying

When you buy from an Instagram or WhatsApp vendor you have never met, escrow means:

• you pay into escrow, not to the vendor;
• the vendor ships, knowing the money is waiting;
• you confirm the item is what was advertised;
• the vendor is paid.

Banks, fintech companies and some tech companies working with partner banks offer this. The Legal 500 guide notes that technology firms are not licensed to hold customer funds directly, so they keep escrow funds in bank accounts through partnerships (Legal 500, Jun 2024).

Escrow for services and artisans

This is the newest use, and the one most homeowners need. Instead of a 70% deposit to a plumber you met yesterday, you put the full agreed sum into escrow. The plumber sees it is there, does the job, and is paid when you confirm. Neither side carries all the risk.

On Gikswork, this is how every hire works. You post a job with what you will pay, the money is held in escrow secured by EscrowPay until the work is done, and either side can raise a dispute that the Gikswork team checks against evidence before any money moves.

How much does escrow cost in Nigeria?

There is no single price. Each provider sets its own fee, usually a percentage of the amount, sometimes plus a flat sum and a cap. Ask three questions:

• What is the fee, in naira, for my amount?
• Who pays it, the buyer, the seller, or both?
• Are there other charges, for example to withdraw or to reverse?

Worked examples with naira sums

These examples use the published Gikswork fees, so you can see how the numbers move. Employers pay no Gikswork fee for hiring. EscrowPay's holding fee is added when the employer adds money: 1.5% plus ₦150, at most ₦3,000, for amounts up to ₦250,000, and 1.25% plus ₦150 above ₦250,000. The worker pays a 10% Gikswork fee on their pay and ₦100 to withdraw. Full details are on our fees page.

How the holding fee is worked out:

• ₦20,000: 1.5% is ₦300, plus ₦150, gives ₦450.
• ₦50,000: 1.5% is ₦750, plus ₦150, gives ₦900.
• ₦250,000: 1.5% is ₦3,750, plus ₦150, gives ₦3,900, which is capped at ₦3,000.
• ₦600,000: 1.25% is ₦7,500, plus ₦150, gives ₦7,650.

Compare that with the alternative. A ₦250,000 tiling job with a 70% deposit puts ₦175,000 at risk with no protection. A ₦3,000 holding fee is about 1.2% of the job.

Escrow with staged release

Some escrow arrangements, often used for property and bigger contracts, release money in parts. A ₦250,000 tiling job could release ₦50,000 when the tiler is on site and the floor is level, ₦160,000 when all tiles are laid and inspected, and the last ₦40,000 after grouting and a week with no loose tiles. The employer never has unseen work paid for, and the tiler is paid as each part is finished.

Is escrow regulated in Nigeria?

Partly. A June 2024 legal guide by Pavestones says there are no specific laws yet regulating escrow service providers in Nigeria, that providers generally operate under Central Bank of Nigeria regulations, and that the CBN's consumer protection rules on fee disclosure and complaints apply. The authors expected the CBN to issue more specific guidelines in future (Legal 500, Jun 2024).

For property, rules are moving too. The federal escrow proposal for off-plan housing was announced in July 2026 but had no published draft when reported (Nairametrics, Jul 2026).

This is general information, not legal advice. For a large property deal, use your own lawyer.

What should I check before trusting an escrow service?

Fake "escrow" is itself a scam. A fraudster sets up a website called something like "SafePay Escrow", tells you to pay there, and keeps the money. Check these before you send anything:

1. Who holds the money? Ask for the name of the bank or licensed payment company holding the funds. You can check that name on the CBN website. If the answer is a person's private account, stop.
2. Who chose the escrow service? Be careful when the seller insists on an escrow site you have never heard of. Choose a known service yourself.
3. Are the release rules written? You should see exactly what triggers release, and what happens if nobody confirms.
4. How are disputes handled? Ask who decides, what evidence counts and how long it takes.
5. Are fees shown before you pay? You should see the naira total, not only a percentage.
6. Are people's identities checked? A good service verifies who is buying and who is selling.
7. Is there a real company behind it? Look for a registered company name, an address and a working support channel.
8. Can you see your money's status? You should be able to see "held", "released" or "in dispute" at any time.

Escrow red flags

Escrow vs paying a deposit: which is safer?

For workers, escrow helps too. You start the job knowing the money is already set aside. If you are an artisan or freelancer, you can join as a worker free and get paid through escrow on every job.

Sources

• Legal 500 (Pavestones), 4 Jun 2024: The emergence of escrow payments in e-commerce transactions in Nigeria
• Nairametrics, 26 Feb 2025: Nigeria's financial sector suffers ₦52.26 billion loss to fraud in 2024, NIBSS report
• Nairametrics, 19 Jun 2026: Bank customers lose ₦134.48 billion to fraud in six years, CBN
• Nairametrics, 26 Nov 2024: NBS says 85.6% of working class Nigerians are self-employed
• Nairametrics, 29 Jul 2025: Pay now, wait later, delays in Lagos property schemes
• Nairametrics, 26 Jul 2026: Housing escrow alone will not protect homebuyers, experts warn FG