AN OVERVIEW OF THE LEGAL REGIME FOR GUARANTEESHIP AS DEBT SECURITY FOR COMMERCIAL BANKS IN NIGERIA

Abstract

This paper examines the legal framework governing guaranteeship as a form of debt security for commercial banks in Nigeria. The motivation for the study arises from the increasing reliance of banks guarantees as credit support mechanisms, juxtaposed with persistent uncertainties in their enforcement and interpretation under Nigerian law. Despite their widespread use, guarantees have been described as flexible yet "slippery." 
thereby raising critical concerns regarding their reliability as security instruments. The study therefore interrogates the research problem of whether the existing legal regime adequately protects the interests of 
commercial banks while maintaining fairness to guarantors. The objectives of the study are to examine the nature, features, and categories of guarantees as a unique financial model of debt securities for commercial 
banks in Nigeria; to analyze the essential ingredients and formal requirements of contracts of guarantee; and to evaluate the effectiveness of the enforcement framework, including BOFIA 2020 and the CBN Guidelines 2022. Doctrinal legal methodology is adopted, relying on statutes, case law, and scholarly literature, complemented by analytical and comparative approaches. The study finds that while guarantees remain 
Indispensable in banking practice, there are still legal challenges confronting its application in Nigeria. Consequently, the study concludes with reform suggestions aimed at enhancing certainty, predictability, and 
effective enforceability guarantees ship in Nigeria.