What is a Promissory Note?

A promissory note refers to a financial instrument that includes a written promise from the issuer to pay a second party – the payee – a specific sum of money, either on a specific future date or whenever the payee demands payment (depending on the terms of the note). The promissory note should include all terms that relate to the indebtness, including when and where the note was issued, the principal amount the issuer owes, what the interest rate on the note is, and when the note reaches maturity (becomes due).

When prepared properly, a legal and proper promissory note is an official financial document that is fully binding under the jurisdiction where it is entered.

Relevant Laws and Regulations

Some relevant laws and regulations that apply to promissory notes in Nigeria include:

• Government Promissory Notes Act – An act to make provision for the creation and issue of Government Promissory Notes.
• Bills of Exchange Act 35, 1990 – An Act to codify the law relating to Bills of Exchange, Cheques and Promissory Note.
• Stamp Duties Act Cap 441 LFN 1990 – An act to provide for the levying of stamp duties on certain matters including documents (also known as instruments for the purpose of the Stamp Duties Act) such as Conveyances on Sale, Bills of Exchange and Promissory Notes.

We hope you find guidance in the foregoing.

Andi Daze, MCIArb.

Managing Partner

Andi Daze Legal