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The short answer
A moratorium is an agreed period at the start of a loan, or during it, when you do not have to repay principal, and sometimes not interest either. On most Nigerian bank and development-finance loans interest still accrues during the moratorium, so you either pay it monthly or it is added to the loan and you repay more later.
Loan offers for factories, farms and building projects in Nigeria often mention a “moratorium” of a few months. The word sounds like a free pass. It is not: it is a delay in repayment, and the cost of that delay is written somewhere in the offer letter. Knowing how it works lets you plan cash flow and compare offers properly.
What a moratorium is
A moratorium is a period during which the lender agrees not to collect some or all of the scheduled repayments. It comes in two broad forms:
- Principal moratorium
- You pay no principal for the agreed period but still pay interest, usually monthly or quarterly.
- Full moratorium
- You pay neither principal nor interest for the period. Interest still builds up and is either paid at the end of the moratorium or added (capitalised) to the loan balance.
- Grace period
- Often used loosely to mean the same thing; check which repayments it covers.
Moratoriums are set before you draw the loan. A lender can also agree to one later when a borrower is struggling, but that is usually called a restructuring. During the COVID-19 period the CBN issued forbearance circulars allowing institutions to restructure facilities (for example, the circular for other financial institutions of 27 May 2020, listed on the CBN circulars page).
Does interest stop during a moratorium?
Almost never on a commercial loan. The money has left the lender’s books, so interest runs from the day of drawdown. What the moratorium changes is when you pay it. Read the clause for three things: whether interest is serviced during the period, whether unpaid interest is capitalised, and whether the total tenor includes the moratorium or is added on top of it.
Worked example (illustrative rate)
A business borrows ₦10,000,000 at an example rate of 12% a year with a six-month moratorium, repayable over five years in total.
| Moratorium type | During the 6 months | Balance when repayments start |
|---|---|---|
| Principal only | Pays ₦100,000 interest each month (₦10,000,000 × 12% ÷ 12) | ₦10,000,000 |
| Full, interest capitalised | Pays nothing | ₦10,600,000 (₦10,000,000 + ₦600,000 simple interest) |
| Full, interest paid at end | Pays nothing, then ₦600,000 in one sum | ₦10,000,000 |
In the capitalised case, interest is then charged on ₦10,600,000 for the rest of the tenor, so the borrower pays interest on interest. Where the lender compounds monthly during the moratorium, the figure would be a little higher than the simple ₦600,000 shown.
Which loans in Nigeria come with one
Moratoriums appear where the money is used to build something that earns later:
- Development finance loans. Lenders such as the Bank of Industry and facilities funded through the Development Bank of Nigeria commonly structure loans with a moratorium; the length depends on the project. Our guide to choosing between BOI and DBN covers how to apply.
- Agricultural loans. A farmer cannot repay before harvest, so input and equipment loans are often timed to the crop cycle.
- Construction and project finance. Repayment begins once the building is let or sold, or the plant is running.
- Equipment and asset finance. Some lenders give a short moratorium while machinery is installed.
Short personal loans rarely have one. Salary-based loans such as GTBank QuickCredit are repaid in equal monthly instalments from the first month (GTBank QuickCredit page, Oct 2026), and payday loans are repaid in full from the next salary.
What to check in the offer letter
- How long the moratorium is, and whether it covers principal only or principal and interest.
- Whether unpaid interest is capitalised, and how often it compounds.
- Whether the moratorium sits inside the stated tenor or extends it.
- Whether any fee applies for it, and what happens if you want to start repaying early.
- What counts as default during the moratorium, for example failing to complete the project or insure the asset.
Our guide to reading a bank loan offer letter goes through the other clauses that matter.
Is a moratorium good for you?
It helps when cash comes in later than the loan: a farm before harvest, a shop before stock sells, a building before rent starts. It hurts when it simply postpones a problem. If the business will not have the cash at the end of the moratorium, the larger capitalised balance makes the problem worse. Build a monthly cash-flow forecast that starts on the first repayment date, not the drawdown date. For how lenders set the underlying rate, see how Nigerian banks set loan interest.
Questions to ask before you accept
- What will my first repayment be, in naira, and on what date?
- How much interest will have built up by the end of the moratorium?
- Can I pay interest during the moratorium to stop it being capitalised, even if I am not required to?
Questions people ask
Do I pay interest during a loan moratorium in Nigeria?
Usually yes, either monthly during the moratorium or later, when the unpaid interest is added to the loan or paid in one sum. Check the moratorium clause in your offer letter.
What does a six-month moratorium mean?
It means you make no principal repayments, and sometimes no interest payments, for the first six months after drawdown. Regular repayments start in month seven unless the agreement says otherwise.
Can I ask my bank for a moratorium on an existing loan?
You can ask, but the bank is not obliged to agree. A moratorium added after drawdown is normally handled as a restructuring and may carry a fee.
Is moratorium the same as loan forgiveness?
No. A moratorium delays repayment; it does not reduce what you owe. Forgiveness or write-off cancels debt, which is rare and separately agreed.
Sources
- CBN: Circulars · accessed Oct 2026
- GTBank: QuickCredit · 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.