By Cynthia Ezekwe
As an avenue to further its mandate to promote financial system stability, the Central Bank of Nigeria (CBN) has barred representative offices of foreign banks from engaging in various financial-related services and other banking business operations in Nigeria without approval.
The Apex bank in Nigeria made this known in a circular to all banks and other financial institutions (OFIs), signed by Muhammad Hamisu Musa, director, financial policy and regulation department. It also contains guidelines for the regulation of representative offices of foreign banks in Nigeria to facilitate the understanding of regulatory requirements for operations of representative offices of foreign banks in Nigeria.
The circular stated that the issuance of the guideline is in pursuant of sections 6(1) and 8 (1) of the Banks and other Financial Institutions Act 2020 (BOFIA), adding that no foreign bank shall operate in Nigeria without prior approval of the CBN, while noting that both sections have necessitated the development of the guidelines for the regulation of representative offices of foreign banks in Nigeria.
“Consequently, all already approved or existing representative offices of foreign banks operating in Nigeria are required to ensure strict compliance with the guidelines within six months from the date of this circular,’’ it added.
Meanwhile, the apex bank noted that representative offices of foreign banks serve an important purpose of showcasing the brand and services of its parent company, adding that It can also stimulate foreign direct investment to the host country by connecting capital to various investment opportunities.
It is in view of the above that the Central Bank of Nigeria issues the guideline, to specify the requirements for the licensing and operations of approved representative offices of foreign banks in Nigeria.
“This Guidelines, issued in exercise of the powers conferred on the CBN under the Central Bank of Nigeria Act, 2007 (CBN Act) and the Banks and Other Financial Institutions Act, Laws of the Federation of Nigeria, 2020 (BOFIA), complements the CBN’s Regulation on the Scope of Banking Activities and Ancillary Matters, No. 3, 2010. It covers the scope and applicability of the guidelines, permissible and non permissible activities for representative offices as well as its licensing, governance, reporting and operational requirements,’’ the circular stated.
The CBN noted that the guidelines applied to banks licensed under any foreign law, whose registered head office is outside Nigeria; any financial institution licensed under foreign law, whose primary business includes the receipt of deposits, granting of loans and/or provision of current and savings accounts; any foreign-owned operating bank/financial holding company that is foreign-based, that owns controlling interest in one or more banks or institutions whose primary business includes the receipt of deposits, granting of loans and provision of current and savings accounts.
The apex bank also noted that any CBN regulated entity found to be assisting, supporting, harbouring or facilitating the presence and/or operations of an unlicensed international financial institution in Nigeria shall be liable to severe sanctions including suspension or revocation of their banking licence.
