Personal Loan Agreement (Nigeria)

A Personal Loan Agreement in Nigeria sets the principal, interest, repayment schedule and security governing a loan between lender and borrower.

Personal lending in Nigeria between private individuals is governed by the general law of contract — the common law of contract as adopted in Nigeria through the Laws of the Federation and applicable state laws. A personal loan agreement is enforceable as a binding contract provided it satisfies the essential requirements of Nigerian contract law: offer, acceptance, consideration (the loan itself), intention to create legal relations, and certainty of terms. The Limitation Law of Lagos State (Cap L62, Laws of Lagos State) and equivalent limitation laws in other states impose a 6-year limitation period on simple contract debts — meaning the lender must commence court proceedings within 6 years of the date the debt became due.

Where the lender is not a CBN-licensed financial institution, the state Money Lenders Laws regulate the transaction. The Lagos State Money Lenders Law (Cap M3, Laws of Lagos State) and equivalent laws in other states require that any person who lends money at interest (otherwise than in the course of a banking business) must hold a current money lender's licence. Lending money on interest without a licence is a criminal offence, and unlicensed money lending agreements may be unenforceable for the interest portion.

Interest paid on a personal loan is subject to withholding tax at 10% under the Withholding Tax Regulations (as updated by the Finance Act 2023) where the borrower is a company making interest payments — but for loans between individuals, personal income tax obligations arise in the hands of the lender on interest income received, assessed under the Personal Income Tax Act (PITA, Cap P8, LFN 2004) by the relevant State Internal Revenue Service.

The legal framework governing the Personal 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 Personal Loan Agreement (Nigeria) in Nigeria should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Contract Law (received English common law) sets the foundational requirements.

A Personal Loan Agreement in Nigeria is needed whenever one individual lends money to another for personal purposes and both parties wish to document the arrangement in writing.

A Personal Loan Agreement is needed when a family member or close friend lends a significant sum of money to another person — for example, to help fund a wedding, medical expenses, school fees, or home renovation — and wishes to document the terms to avoid future misunderstandings about repayment.

A Personal Loan Agreement is required when an employer extends a personal salary advance or staff loan to an employee, to be repaid by monthly deductions from salary. Employee loans must be documented to comply with the employer's internal HR policy and to evidence the deduction authority under Section 18 of the Labour Act (Cap L1, LFN 2004).

A Personal Loan Agreement is needed when a Nigerian who has received a remittance from abroad (for example, from a diaspora family member) borrows that sum on agreed repayment terms and wishes to document the obligation formally.

A Personal Loan Agreement is required when a microfinance institution — licensed by the CBN under the Microfinance Policy, Regulatory and Supervisory Framework — advances a personal microloan to an individual customer and needs to comply with CBN documentation requirements for its loan book.

A Personal Loan Agreement is needed when any loan is secured — for example, by a pledge of personal property, a motor vehicle logbook, or a postdated cheque — and the parties need a written agreement to document both the debt and the security arrangement. Under Section 4 of the Stamp Duties Act (Cap S8, LFN 2004), personal loan agreements must be stamped by the Federal Inland Revenue Service (FIRS) or the relevant State Internal Revenue Service before they can be tendered as evidence in proceedings before the Magistrate Court or State High Court. Section 22 of the Land Use Act 1978 (Cap L5, LFN 2004) requires governor's consent for any mortgage of real property created as security for the loan. Section 2 of the Limitation Law of Lagos State (Cap L62, Laws of Lagos State) and equivalent limitation laws in other states impose a 6-year limitation period on simple contract debts — the lender must commence court action within 6 years of each missed repayment. Section 18 of the Labour Act (Cap L1, LFN 2004) restricts salary deductions for loan repayment — the employer must obtain written employee authorisation enforceable before the National Industrial Court of Nigeria (NICN). Section 3 of the Lagos State Money Lenders Law (Cap M3, Laws of Lagos State) requires unlicensed private lenders who charge interest to hold a valid money lender's licence. The Nigeria Data Protection Act 2023 (NDPA) administered by the Nigeria Data Protection Commission (NDPC), together with the Nigeria Data Protection Regulation (NDPR) 2019, govern personal data of lenders and borrowers. The Personal Income Tax Act (PITA, Cap P8, LFN 2004), administered by State Internal Revenue Services, applies to interest income earned by individual lenders.

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

Parties: Full legal names, addresses, and descriptions (occupation, National Identification Number — NIN) of the lender and the individual borrower. Both parties must be adults of full legal capacity under Nigerian law. Where the lender is not a CBN-licensed financial institution, the applicable state Money Lenders Law — such as the Lagos State Money Lenders Law (Cap M3, Laws of Lagos State) — requires the lender to hold a current money lender's licence.

Loan Amount: The principal sum in NGN advanced by the lender to the borrower, with confirmation that the funds have been paid or the disbursement date. The loan must be evidenced in writing and stamped under the Stamp Duties Act (Cap S8, LFN 2004) to be admissible in evidence before the Magistrate Court or State High Court.

Interest Rate: The agreed interest rate — whether flat rate, reducing balance, or interest-free — stated clearly as a percentage per annum or per month. Personal Income Tax Act (PITA, Cap P8, LFN 2004), assessed by the relevant State Internal Revenue Service, applies to interest income earned by individual lenders. Withholding tax at 10% under the Finance Act 2023 applies where the borrower is a company paying interest.

Repayment Schedule: A clear repayment plan showing the due dates and amounts of each repayment instalment, with allocation between principal and interest. The Limitation Law of Lagos State (Cap L62, Laws of Lagos State) and equivalent state limitation laws impose a 6-year limitation period for simple contract debts — the lender must commence court proceedings within 6 years of the due date.

Default and Late Payment: Consequences of failure to repay — including default interest rate, grace period, and the lender's right under Order 10 of the Lagos State High Court (Civil Procedure) Rules 2019 to apply for summary judgment on an undisputed debt.

Security (if any): Description of any security — pledged asset, guarantor, or postdated cheque. Security over real property requires a separate mortgage deed and governor's consent under Section 22 of the Land Use Act 1978 (Cap L5, LFN 2004), registered at the State Land Registry.

Prepayment: Whether the borrower may repay early and whether any prepayment penalty applies under the loan terms.

Governing Law: Laws of the Federal Republic of Nigeria and the applicable state — Lagos, Rivers, Abuja FCT, Kano, or other — with jurisdiction in the relevant Magistrates' Court or State High Court depending on the loan amount. The Federal High Court and State High Courts have jurisdiction over civil debt recovery matters.

Data Protection: Personal data of the lender and borrower must comply with the Nigeria Data Protection Act 2023 (NDPA) administered by the Nigeria Data Protection Commission (NDPC), and the Nigeria Data Protection Regulation (NDPR) 2019. Forms-legal.com provides this template as a starting point for Nigeria-compliant documentation.