Document background
The Performance Bank Guarantee is a crucial financial instrument in Nigerian commercial practice, commonly required in significant commercial contracts, particularly in construction, infrastructure, and government projects. It provides financial security to project owners or employers (beneficiaries) by ensuring that a bank will pay a specified sum if a contractor or service provider (principal) fails to perform their contractual obligations. The document is governed by Nigerian law, particularly the Banks and Other Financial Institutions Act (BOFIA) 2020 and relevant Central Bank of Nigeria regulations. This type of guarantee is often required during the bidding process or as a condition precedent to contract effectiveness, typically ranging from 5% to 10% of the contract value. The guarantee serves as an independent obligation of the bank, separate from the underlying contract, and can be called upon following specified procedures and conditions.
