Document background
The Memorandum of Understanding For Loan Agreement is a crucial preliminary document used in Nigerian financial transactions when parties wish to document their initial understanding regarding a proposed loan arrangement before proceeding with a formal loan agreement. This document is particularly valuable when dealing with complex loan structures, multiple parties, or when significant due diligence is required. It provides a framework for negotiations while allowing parties to maintain flexibility before final commitment. Under Nigerian law, while most provisions are non-binding, certain clauses such as confidentiality and governing law can be made binding. The document must align with Nigerian financial regulations, including BOFIA 2020 and CBN guidelines, and typically precedes more detailed loan documentation. It's commonly used by financial institutions, corporate entities, and private lenders to outline key commercial terms, proposed security arrangements, and conditions precedent to the final loan agreement.
