Secured Loan Agreement (Nigeria)

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

The primary forms of security in Nigerian lending practice are: (1) legal mortgage over real property, created by a Deed of Legal Mortgage and governed by the Conveyancing Act 1881 (applicable in southern Nigerian states) and the Land Use Act 1978. Under Section 22 of the Land Use Act 1978, a mortgage over a right of occupancy requires the governor's consent — without which the mortgage is void ab initio (Savannah Bank of Nigeria Ltd v Ajilo [1989] 1 NWLR (Pt 97) 305); (2) equitable mortgage, created by deposit of title deeds with the lender; (3) debenture (fixed and floating charge) over the assets of a company, registered at the Corporate Affairs Commission (CAC) under CAMA 2020, Section 216, within 90 days of creation; (4) pledge of shares (executed by share transfer form deposited with the lender); and (5) guarantees from third parties.

For CBN-licensed banks and financial institutions, secured lending is regulated by BOFIA 2020 and the CBN Prudential Guidelines for Deposit Money Banks, which set requirements for credit risk assessment, collateral valuation, and provisioning. The CBN's Credit Risk Management Framework requires banks to independently value real property collateral using ESVARBON-registered estate surveyors before accepting it as security.

The legal framework for enforcement of security in Nigeria includes the power of sale under mortgages (governed by Section 19 of the Conveyancing Act 1881 for southern states), the appointment of a Receiver and Manager under a debenture (governed by the debenture deed and CAMA 2020), and the Sheriffs and Civil Process Act (Cap S6, LFN 2004) for enforcement of judgment debts.

The legal framework governing the Secured 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 Secured 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 Secured Loan Agreement in Nigeria is needed whenever a lender requires collateral security before advancing funds to a borrower.

A Secured Loan Agreement is required for mortgage loans — where a bank, primary mortgage bank, or private lender advances funds to enable the borrower to purchase real property, with the property itself serving as the mortgage security under a Deed of Legal Mortgage. The Federal Mortgage Bank of Nigeria (FMBN) and CBN-licensed primary mortgage banks (PMBs) routinely require secured loan documentation for residential mortgage advances.

A Secured Loan Agreement is needed when a company borrows working capital or term finance from a commercial bank and the bank requires a debenture — fixed and floating charge — over all the company's present and future assets as security, registered at the CAC under CAMA 2020, Section 216.

A Secured Loan Agreement is required for asset finance — for example, when a lender advances funds for the purchase of machinery, vehicles, or equipment, with the financed asset itself pledged as collateral under a chattel mortgage or hire purchase agreement.

A Secured Loan Agreement is needed for private lending arrangements where the lender, not being a bank, requires security — such as a pledge of the borrower's shares in a private company, a deposit of the borrower's Certificate of Occupancy title documents, or a personal guarantee from the borrower's spouse or business partners — to mitigate default risk on a significant private loan.

A Secured Loan Agreement is required in project finance transactions — such as power generation, toll road, or real estate development projects — where lenders (commercial banks, DFIs) take a security package over the project assets, project accounts, and project contracts as conditions for drawdown of construction or term finance facilities.

Parties in Nigeria should prepare a Secured 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 Secured Loan Agreement in Nigeria must contain the following essential elements in addition to standard loan terms.

Security Description: A precise description of each item of collateral — for real property, the plot number, survey plan reference, Certificate of Occupancy number, local government area, and state; for company assets, the class of assets subject to fixed charge and the description of the floating charge; for pledged shares, the company name, RC number, and number and class of shares.

Security Documents: A list of the security instruments to be executed alongside the loan agreement — Deed of Legal Mortgage, Debenture Deed, Share Pledge Agreement, Personal Guarantee, Corporate Guarantee — and the conditions for perfecting each instrument (including governor's consent under the Land Use Act 1978 for mortgages, CAC charge registration under CAMA 2020, Section 216, for debentures).

Valuation: A clause confirming that the collateral has been independently valued by an ESVARBON-registered estate surveyor (for real property) or other qualified professional, and the agreed forced-sale value of the collateral.

Insurance: An obligation on the borrower to maintain adequate insurance on mortgaged property and charged assets throughout the loan term, with the lender noted as a joint insured or loss payee on the relevant NAICOM-licensed insurer's policy.

Negative Pledge: A covenant by the borrower not to create any further charges or encumbrances over the secured assets without the lender's prior written consent, to protect the lender's priority position.

Power of Sale and Enforcement: A clear statement of the lender's right to exercise a power of sale over mortgaged property under Section 19 of the Conveyancing Act 1881, to appoint a Receiver and Manager under the debenture, or to enforce other security on the occurrence of an Event of Default.

Governor's Consent Condition Precedent: For real property security, a condition that the Deed of Legal Mortgage does not take effect until governor's consent under Section 22 of the Land Use Act 1978 has been obtained from the relevant State Lands Bureau.

Additional compliance elements for a Secured 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.