AI agents for business finance: what they can and can't do
What AI agents can do in bookkeeping, close, collections and compliance today, where a person must stay in charge, and how to judge a product.
The short answer
A bank guarantee is a written promise by your bank to pay a beneficiary if you fail to meet an obligation, such as delivering a contract. Nigerian banks issue bid bonds, performance bonds and advance payment guarantees, usually for one year or less according to Access Bank (Oct 2026). The cost is a commission set by the bank plus, often, cash cover or other security; banks do not publish standard rates.
Government agencies, large companies and port authorities in Nigeria often ask contractors and importers for a bank guarantee before they award a contract, release an advance or clear goods. For a small business the request can feel like a barrier. It is easier to handle once you know what the guarantee does, what the bank wants in return and how to price it into your bid.
What a bank guarantee is
A guarantee is a promise from your bank to the beneficiary (the party you are contracting with) that it will pay a stated sum if you do not perform. The bank is lending its creditworthiness, not cash, so a guarantee is often called a contingent facility: the bank only pays if it is called. If the bank pays out, you owe the bank that money.
Common types
- Bid bond or bid security
- Shows a tendering body that you will sign the contract if you win.
- Performance bond
- Protects the client if you do not complete the contract as specified.
- Advance payment guarantee (APG)
- Lets a client release an advance payment to you, backed by the bank's promise to refund it if you do not perform.
- Retention and warranty bonds
- Replace cash held back by the client during a defects period.
- Customs and importation bonds
- Required by ports and customs for certain imports.
- Standby letter of credit (SBLC)
- A guarantee-like instrument often used in trade.
Access Bank's Bonds and Guarantees page lists these instruments and says their tenor is usually one year or less, that they are multi-currency and can be for any amount (as at Oct 2026).
What it costs
Banks do not publish a standard price for guarantees; the cost is negotiated for each customer. It is usually made up of:
- Commission, charged as a percentage of the guaranteed amount for each period the guarantee is outstanding.
- Cash cover or security, where the bank asks you to hold some or all of the guaranteed amount in a blocked account, or to pledge other collateral. Strong customers with an approved credit line may need less.
- Documentation or processing charges, and VAT where it applies.
Worked example (illustrative figures only)
A contractor needs a ₦20,000,000 performance bond for 12 months. Suppose the bank quotes a commission of 1% per quarter and asks for 50% cash cover. These figures are examples, not any bank's rate.
| Item | Calculation | Amount |
|---|---|---|
| Commission per quarter | 1% of ₦20,000,000 | ₦200,000 |
| Commission for the year | ₦200,000 x 4 | ₦800,000 |
| Cash cover held by the bank | 50% of ₦20,000,000 | ₦10,000,000 (returned when the bond expires uncalled) |
The commission is a cost you should price into your bid. The cash cover is not lost, but it is tied up for the life of the guarantee, which affects your working capital.
How to get one: steps
- Read the tender or contract to find the exact type, amount, currency, expiry and wording required. Many beneficiaries supply a template.
- Approach the bank where your business account and turnover sit; banks prefer customers they can see.
- Submit a request with the contract or tender document, your CAC documents, board resolution, recent statements and financials.
- Agree the commission, cash cover or security, and sign the counter-indemnity, which is your promise to repay the bank if the guarantee is called.
- The bank issues the guarantee to the beneficiary or to you for submission.
- Track the expiry date and request cancellation and release of cash cover when the obligation ends.
How the bank assesses you
Even though a guarantee is not a cash loan, the bank treats it as credit, because it may have to pay. It looks at the same things it would for a loan: how long you have banked with it, the turnover in your account, your financial statements, your track record on similar contracts, your credit bureau record and the strength of the client you are contracting with. A first-time contractor with little history should expect to provide more cash cover than an established firm. Building a record of completed contracts, with turnover running through one bank, is what lowers the cash cover over time.
Start early. Tender deadlines are fixed, and a guarantee request that arrives at the bank a day before submission is unlikely to be ready. Ask the bank how long its internal approval takes for your size of request.
Points that cause problems
- Unlimited or vague expiry. Banks dislike open-ended guarantees and may price them higher.
- On-demand wording. Many guarantees can be called without proof of default. Understand what triggers payment.
- Currency mismatch. A guarantee in US dollars exposes you to exchange rate movements if called.
- Forgetting to cancel. Commission can keep running until the bank receives the original document or a release.
If the contract also needs funding to perform, see contract finance in Nigeria and bank business loan requirements.
Where Pryme fits
Pryme does not issue bank guarantees. A Pryme Business Account can keep tender proceeds and costs in one place, and the Compliance agent can prepare document checklists for review; a person approves anything above a set ceiling.
Questions people ask
How much does a bank guarantee cost in Nigeria?
Banks negotiate the price per customer and do not publish standard rates. Expect a commission on the guaranteed amount for each period it runs, plus cash cover or other security.
What is the difference between a bid bond and a performance bond?
A bid bond supports your tender and is released once the contract is signed. A performance bond protects the client during the contract if you fail to deliver.
Can a small business get a bank guarantee without collateral?
Sometimes, if it has a strong account history and an approved credit line, but many banks ask for cash cover or other security. Ask the bank where your turnover goes.
How do I verify a bank guarantee is real?
Contact the issuing bank directly through its official channels. Access Bank, for example, says its instruments need written verification by its company secretary or legal adviser before reliance.
Sources
- Access Bank: Bonds and Guarantees · accessed Oct 2026
- Access Bank: Vehicle Finance · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.