Demand Promissory Note (Nigeria)

A Demand Promissory Note in Nigeria sets out the principal, interest and repayment schedule for a debt owed by the maker to the payee.

In Nigeria, promissory notes are governed by the Bills of Exchange Act (Cap B8, Laws of the Federation of Nigeria 2004), which adopts the provisions of the English Bills of Exchange Act 1882 as applicable law. Section 83 of the Bills of Exchange Act (Cap B8) defines a promissory note as an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay on demand or at a fixed or determinable future time a sum certain in money to or to the order of a specified person or to bearer. The Supreme Court of Nigeria in Odutola v Papersack Nigeria Ltd [1994] 2 NWLR (Pt 326) 344 confirmed the negotiable character of promissory notes under Nigerian law.

Because a Demand Promissory Note is payable on demand without any condition precedent other than presentment, it creates an immediately actionable obligation — the holder may sue the maker for the face amount plus interest at any time after demand, without waiting for a contractual maturity date. This makes demand notes particularly useful as collateral security instruments in commercial transactions, where a lender takes the note as evidence of the borrower's unconditional payment obligation.

Stamp duty on a promissory note in Nigeria is assessed under the Stamp Duties Act (Cap S8, LFN 2004) at a fixed rate per note. The Federal Inland Revenue Service (FIRS) assesses stamp duty for notes involving companies; state internal revenue services assess it for notes between individuals. An unstamped promissory note may be inadmissible in evidence.

The legal framework governing the Demand Promissory Note (Nigeria) in Nigeria draws on several key statutes and regulatory bodies. Under Nigerian law, the Companies and Allied Matters Act 2020 (CAMA) regulates corporate entities through the Corporate Affairs Commission (CAC). The Labour Act (Cap L1 LFN 2004) and the National Industrial Court of Nigeria (NICN) govern employment disputes. The Nigeria Data Protection Regulation (NDPR) 2019 and the Nigeria Data Protection Commission (NDPC) protect personal data. The Federal Inland Revenue Service (FIRS) administers tax obligations under the Companies Income Tax Act. The Federal High Court and state High Courts have jurisdiction over civil matters. Parties executing a Demand Promissory Note (Nigeria) in Nigeria should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Bills of Exchange Act (Cap. B8, LFN 2004) sets the foundational requirements.

A Demand Promissory Note is needed in Nigeria whenever a borrower wants to provide a lender with a strong, immediately enforceable written promise of repayment, payable upon demand.

A Demand Promissory Note is required when a business owner borrows money from a private investor, family member, or business partner on an informal basis but needs to document the obligation in a legally enforceable form. The note evidences the debt clearly and creates an actionable instrument.

A Demand Promissory Note is needed when a company takes a short-term working capital advance from a director or shareholder and needs to record the obligation as a formal debt instrument — distinguishing the advance from equity investment and establishing the lender's right to repayment on demand.

A Demand Promissory Note is required when a bank or microfinance institution issues a small business loan and uses the promissory note as part of its security package, alongside a mortgage or personal guarantee.

A Demand Promissory Note is needed as collateral in trade finance transactions where one company gives another a note as security against future performance — for example, an importer provides a note to a trading partner as security for a consignment delivered on credit terms.

A Demand Promissory Note is used when parties to a commercial settlement agree that one party will pay a specified sum and the other takes the note as evidence of the settlement obligation — the note can be immediately enforced if the settlement payment is not made.

Parties in Nigeria should prepare a Demand Promissory Note (Nigeria) proactively rather than waiting for a dispute to arise. Courts interpret agreements based on the written terms rather than oral representations. Under Nigerian law, the Companies and Allied Matters Act 2020 (CAMA) regulates corporate entities through the Corporate Affairs Commission (CAC). The Labour Act (Cap L1 LFN 2004) and the National Industrial Court of Nigeria (NICN) govern employment disputes. The Nigeria Data Protection Regulation (NDPR) 2019 and the Nigeria Data Protection Commission (NDPC) protect personal data. The Federal Inland Revenue Service (FIRS) administers tax obligations under the Companies Income Tax Act. The Federal High Court and state High Courts have jurisdiction over civil matters. Where the transaction involves regulated activities, prior approval from the relevant authority may be required before execution.

A valid Demand Promissory Note under Nigerian law (Bills of Exchange Act, Cap B8, LFN 2004) must contain the following essential elements.

Unconditional Promise: An unconditional promise to pay — 'I promise to pay' or 'We promise to pay'. Under Section 83 of the Bills of Exchange Act (Cap B8, LFN 2004), any condition attached to the promise (other than the condition of demand itself) invalidates the note as a negotiable instrument, though it may still be enforceable as a simple contract under Nigerian common law.

Demand: A statement that the note is payable 'on demand' or 'on presentment' — this distinguishes a demand note from a time note and activates the holder's immediate right to sue upon dishonour without waiting for a fixed maturity date.

Sum Certain: The principal amount stated clearly in both words and figures in Nigerian Naira (NGN). The amount must be certain. Under the Judgment (Enforcement) Rules applicable in the Federal High Court and state High Courts, a liquidated sum stated on a dishonoured promissory note entitles the holder to apply for summary judgment under Order 11 of the Lagos State High Court (Civil Procedure) Rules 2019 without a full trial.

Payee: The name of the person (payee) to whom or to whose order the note is payable, or 'bearer' if payable to bearer. Where the payee is a company, include the Corporate Affairs Commission (CAC) RC number to confirm identity.

Maker's Details: Full legal name and address of the maker (person who makes the promise), with signature. For corporate makers under the Companies and Allied Matters Act 2020 (CAMA 2020), the note must be executed by a duly authorised director or company secretary.

Date: The date on which the note is made. Section 12 of the Bills of Exchange Act (Cap B8, LFN 2004) provides that if no date is stated, the note may be treated as dated on the date of delivery.

Interest: If the note is to carry interest, the interest rate must be stated on the face of the note. Omission of the rate means the note carries no contractual interest — only post-judgment interest awarded by the court under the Judgment (Enforcement) Rules.

Place of Payment: The location where payment is to be made upon demand — typically the maker's bank account held with a Central Bank of Nigeria (CBN)-licensed commercial bank or the maker's business address.

Stamp Duty: The note must be stamped under the Stamp Duties Act (Cap S8, LFN 2004) before it can be admitted in evidence in proceedings before the Federal High Court or any state High Court. The Federal Inland Revenue Service (FIRS) assesses and collects stamp duty for notes involving companies.

Witnesses: While Section 83 of the Bills of Exchange Act does not strictly require witnesses for validity, two independent witnesses strengthen the evidentiary value of the note in contested proceedings and are recommended by the Nigeria Data Protection Commission (NDPC) guidance on documentation of financial transactions involving personal data.

Data Protection: Personal data of the parties — including National Identification Numbers (NIN) and Bank Verification Numbers (BVN) — must be processed in compliance with the Nigeria Data Protection Regulation (NDPR) 2019. Forms-legal.com provides this Demand Promissory Note template as a starting point for Nigeria-compliant documentation under the Bills of Exchange Act (Cap. B8, LFN 2004).