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The Advance Payment Guarantee Letter is a crucial financial instrument in Nigerian business transactions, particularly in sectors requiring significant upfront capital. It is typically required when a project owner needs to make advance payments to a contractor but seeks protection against potential non-performance or default. The guarantee, issued by a Nigerian bank or financial institution, provides assurance that the advance payment will be refunded if the contractor fails to execute the contract as agreed. This document type is regulated under Nigerian banking laws and financial regulations, including BOFIA 2020 and Central Bank of Nigeria guidelines. The guarantee typically specifies the maximum amount covered, validity period, conditions for calling on the guarantee, and the process for making claims. It serves as a risk management tool while facilitating project execution by enabling contractors to access necessary working capital.

1. Bank's Details and Reference Number: Bank's letterhead, contact information, and unique guarantee reference number

2. Date and Addressee: Current date and beneficiary's complete details

3. Project Reference: Details of the underlying contract or project for which the advance payment is being made

4. Guarantee Amount: Specific amount being guaranteed, both in figures and words

5. Principal Obligations: Clear statement of the bank's obligation to pay upon first written demand

6. Trigger Conditions: Conditions under which the guarantee can be called upon

7. Validity Period: Commencement and expiry dates of the guarantee

8. Governing Law and Jurisdiction: Statement that the guarantee is governed by Nigerian law

9. Bank's Authorized Signature: Signature block for authorized bank officials