dark

CBN restricts foreign banks from ‘banking businesses’ in Nigeria

CBN Headquarters

The Central Bank of Nigeria (CBN) has barred foreign banks operating representative offices in the country from providing services designated as ‘banking businesses’ and a host of other services.

This is contained in a recent circular, titled: “Guidelines for the Regulation of Representatives Offices of Foreign Banks in Nigeria – Exposure Draft,” which was addressed to, “Representative Offices of Foreign Banks in Nigeria, Stakeholders and the General Public.” 

The guidelines, according to the Director, Financial Policy and Regulation Department, Chibuzo Efobi, is an exposure draft of regulatory requirements for the licensing and operations of approved representative offices of foreign banks in Nigeria, and complements the regulation on the scope of banking activities and ancillary matters.

Bank representative office refers to a banking unit that does not conduct banking operations, and is located outside of the bank’s headquarters. Such offices play a vital role in promoting the parent company’s brand and services, while also encouraging foreign direct investment by connecting funds to numerous investment opportunities in the host country.

Non-permissible activities

Under the CBN guidelines, the Approved Representative Offices shall not engage in the following services/activities in the country:

  • Provision of services designated in Nigeria as banking business;
  • Provision of any commercial or trading activity that could lead to the issuance of invoices for services rendered;
  • Acceptance of orders on behalf of the foreign parent; and,
  • Engage directly in any financial transaction.

“It is in view of these that the CBN issues these guidelines, to specify the requirements for the licensing and operations of approved representative offices of foreign banks in Nigeria,” the circular added.

The Central Bank of Nigeria (CBN) is empowered by Section 8 of the Banks and Other Financial Institutions Act 2020 (BOFIA), to mandate foreign banks to seek prior approval of the CBN before they can operate in Nigeria.

Legal provision

Explaining the legality of its action, the apex bank said: “The Central Bank of Nigeria (CBN) is empowered by Section 8 of the Banks and Other Financial Institutions Act 2020 (BOFIA), to mandate foreign banks to seek prior approval of the CBN before they can operate in Nigeria.

“This provision, coupled with requests from foreign banks, law firms, and financial consultants, among others, on the requirements for operating representative offices of foreign banks in Nigeria, has made it pertinent to develop guidelines prescribing the regulatory requirements.

“Accordingly, the draft guidelines have been developed to provide guidance to stakeholders, particularly foreign banks, seeking to operate in Nigeria.”

Also, comments and observations to the guidelines are expected to be addressed to: “the Director, Financial Policy and Regulation Department, CBN, with soft copies sent via email to fprd_cedg@cbn.gov.ng within three (3) weeks from the date of this circular,” which was dated October 10th.

Specific requirements

Under the guidelines, the CBN Governor must receive a formal application from foreign banks and other financial institutions seeking to open an authorized representative office in Nigeria.

Such applications must be accompanied with a memorandum of understanding (MoU), and proof of name reservation with the Corporate Affairs Commission (CAC), and a certificate from a recognized audit firm confirming that no income was received or accrued to the Nigeria office during the fiscal year, among other documents.

Also, the foreign banks are to pay a non-refundable application charge of N5 million and a non-refundable license fee of N10 million.

Total
0
Shares
Leave a Reply

Your email address will not be published. Required fields are marked *

Previous Post

World Bank warns of food, energy, fertilizer crisis in 2023

Next Post

Stakeholders to explore economic, social opportunities in energy transition plan

Related Posts
Total
0
Share