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Loan Note Agreement for Nigeria

Loan Note Agreement Template for Nigeria

A Loan Note Agreement under Nigerian law is a formal financial instrument that documents the terms and conditions of a loan facility between a lender and borrower. The agreement complies with Nigerian financial regulations, including the Companies and Allied Matters Act (CAMA) 2020 and relevant banking laws. It sets out detailed provisions for the loan amount, interest calculations, repayment terms, security arrangements (if any), events of default, and enforcement mechanisms. The document includes necessary provisions for compliance with Nigerian stamp duty requirements and foreign exchange regulations where applicable.

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What is a Loan Note Agreement?

The Loan Note Agreement is a crucial financial instrument used in Nigerian commercial lending transactions to formalize debt arrangements between parties. It serves as the primary documentation for both secured and unsecured lending facilities, providing legal certainty and enforcement mechanisms under Nigerian law. This document type is commonly used for corporate borrowing, project finance, and structured lending transactions, incorporating requirements from Nigerian financial regulations, including CAMA 2020, the Investment and Securities Act, and banking regulations. The agreement typically includes comprehensive provisions on loan terms, interest calculations, repayment schedules, security arrangements, events of default, and enforcement mechanisms, ensuring compliance with local statutory requirements while protecting both lender and borrower interests.

What sections should be included in a Loan Note Agreement?

1. Parties: Identification of the lender(s) and borrower(s) with full legal names and addresses

2. Background: Context of the loan arrangement and purpose of the facility

3. Definitions and Interpretation: Definitions of key terms used throughout the agreement and rules of interpretation

4. The Facility: Details of the loan amount, purpose, and availability

5. Interest: Interest rate, calculation method, and payment terms

6. Repayment: Repayment schedule, methods, and prepayment provisions

7. Representations and Warranties: Statements of fact and assurances given by the borrower

8. Conditions Precedent: Conditions that must be satisfied before the loan becomes available

9. Covenants: Positive and negative obligations of the borrower during the loan term

10. Events of Default: Circumstances that would constitute a default and consequences

11. Payments: Payment mechanics, currency, and timing

12. Changes to Parties: Rules regarding assignment and transfer of rights

13. Notices: Communication methods and contact details

14. Governing Law and Jurisdiction: Confirmation of Nigerian law as governing law and jurisdiction for disputes

What sections are optional to include in a Loan Note Agreement?

1. Security: Details of any security or collateral - include if the loan is secured

2. Guarantee: Terms of any guarantee - include if there are guarantors

3. Tax Gross Up: Provisions for tax payments and withholding - include if tax implications are significant

4. Increased Costs: Provisions for dealing with regulatory changes affecting the lender's costs - include for longer-term loans

5. Multiple Lenders: Provisions governing relationship between multiple lenders - include if more than one lender

6. Agency Provisions: Terms governing the appointment and role of a facility agent - include for syndicated loans

7. Foreign Currency Provisions: Exchange rate provisions - include if loan involves foreign currency

What schedules should be included in a Loan Note Agreement?

1. Schedule 1 - Conditions Precedent: Detailed list of documents and conditions required before drawdown

2. Schedule 2 - Form of Drawdown Request: Template for borrower to request loan disbursement

3. Schedule 3 - Repayment Schedule: Detailed amortization schedule showing payment dates and amounts

4. Schedule 4 - Form of Transfer Certificate: Template for transferring loan participations

5. Schedule 5 - Security Documents: List and copies of security documents if loan is secured

6. Appendix A - Calculation of Interest: Detailed methodology for interest calculations

7. Appendix B - Form of Compliance Certificate: Template for periodic compliance reporting

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents

Jurisdiction

Nigeria

Publisher

Genie AI

Document Type

Promissory Note

Sector

Banking

Cost

Free to use

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