Business Loan Agreement (Nigeria)

A Business Loan Agreement in Nigeria governs a credit facility, defining the lender's and borrower's rights over the life of the loan.

Business lending in Nigeria is regulated at multiple levels. The Banks and Other Financial Institutions Act 2020 (BOFIA 2020) governs lending by CBN-licensed banks and governs the creation and enforcement of security interests including legal mortgages, equitable mortgages, debentures, and fixed and floating charges. The Companies and Allied Matters Act 2020 (CAMA 2020) governs how Nigerian companies create and register charges over their assets at the Corporate Affairs Commission (CAC) — a charge created by a company over its assets must be registered at the CAC within 90 days of creation under CAMA 2020, Section 216, failing which it is void against liquidators and creditors.

Money lending to businesses by individuals or entities that are not CBN-licensed banks is regulated by state Money Lenders Laws — for example, the Lagos State Money Lenders Law (Cap M3, Laws of Lagos State) requires that any person lending money on interest (other than a CBN-licensed institution) must hold a valid money lender's licence issued by the Magistrate Court of the relevant state. Lending without a licence is a criminal offence.

Interest rates on Nigerian business loans from CBN-licensed banks are subject to market forces and CBN monetary policy. The Central Bank of Nigeria sets the Monetary Policy Rate (MPR), which currently influences commercial lending rates. Banks typically charge between 18% and 30% per annum on naira-denominated business loans. The Finance Act 2021 amended the CITA to restrict the deductibility of interest on loans between connected parties (thin capitalisation rules) under the FIRS transfer pricing guidelines.

The legal framework governing the Business Loan Agreement (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 Business Loan Agreement (Nigeria) in Nigeria should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Banks and Other Financial Institutions Act (BOFIA) 2020 sets the foundational requirements.

A Business Loan Agreement in Nigeria is needed whenever a business borrows money from a lender for commercial purposes and both parties require a written record of the terms.

A Business Loan Agreement is needed when a Nigerian SME (small and medium enterprise) — registered with the CAC under CAMA 2020 — borrows working capital from a commercial bank such as First Bank of Nigeria, Zenith Bank, or Access Bank, and the bank requires a formal Facility Letter and Loan Agreement as part of its credit documentation package.

A Business Loan Agreement is required when a company receives a loan from a related party — such as a shareholder, parent company, or affiliated entity — as part of a corporate group financing structure. Under the FIRS Transfer Pricing Regulations 2018 and the Finance Act 2021 thin capitalisation rules, inter-company loans must be documented at arm's length terms and must be evidenced by a written agreement.

A Business Loan Agreement is needed when a Nigerian entrepreneur receives a business loan from a development finance institution — such as the Bank of Industry (BOI), the Development Bank of Nigeria (DBN), NEXIM Bank, or the Nigerian Export-Import Bank — under a specific facility programme, such as the BOI's SME loan scheme or the Central Bank of Nigeria's Targeted Credit Facility.

A Business Loan Agreement is required when two private parties — a private lender and a business borrower — agree a commercial loan outside the banking system. To be enforceable, the agreement must be in writing and, if the lender is not a CBN-licensed institution, the lender must hold a Money Lenders Licence under the applicable state Money Lenders Law to lawfully charge interest.

Parties in Nigeria should prepare a Business Loan Agreement (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 Business Loan Agreement in Nigeria must contain the following essential elements.

Parties: Full legal names, CAC RC numbers (for companies under CAMA 2020), registered addresses, and the roles of the lender and borrower. For corporate borrowers, confirm the relevant director's authority to execute the agreement under a board resolution.

Loan Amount and Currency: The principal amount of the loan in NGN (or foreign currency where applicable under CBN foreign exchange guidelines), the draw-down conditions, and any commitment fee.

Interest Rate: The interest rate — whether fixed or variable (and if variable, the reference rate: for example, CBN MPR plus a margin) — and the interest calculation method (30/360 or actual/365 days). Where the lender is not a CBN-licensed institution, the agreed rate must not exceed the maximum permitted under applicable state Money Lenders Laws.

Repayment Schedule: The loan tenor, repayment dates, amounts of each instalment, and the final maturity date. A repayment schedule should be attached as a schedule to the agreement.

Security: The type and description of security provided by the borrower — whether a legal mortgage over real property (requiring governor's consent under the Land Use Act 1978), a debenture (fixed and floating charge over the company's assets registered at the CAC under CAMA 2020), a personal guarantee from the directors or shareholders, or a pledge of specific assets.

CAC Charge Registration: For company borrowers, a clause confirming that any charge created under the agreement will be registered at the Corporate Affairs Commission within 90 days of creation under CAMA 2020, Section 216.

Events of Default: A thorough list of events of default — including non-payment, breach of covenant, insolvency, and material adverse change — and the lender's remedies on default (acceleration of the loan, enforcement of security, appointment of receiver under the lender's debenture).

Governing Law: Laws of the Federal Republic of Nigeria, with jurisdiction in the Federal High Court (for banking matters under Section 251(1)(d) of the Constitution) or the relevant State High Court.

Additional compliance elements for a Business Loan Agreement (Nigeria) used in Nigeria include: 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. Forms-legal.com provides this template as a starting point for Nigeria-compliant documentation.