The Central Bank of Nigeria (CBN) has ordered bank directors with non-performing insider-related loans to step down immediately, as part of efforts to strengthen corporate governance and enhance risk management in the banking sector.
The directive was issued in a circular dated Monday, February 17, signed by Adetona Adedeji, Acting Director of Banking Supervision.
Insider loans are the credit facilities granted by the bank to its executives, directors, employees, major shareholders, or other related parties.
The apex bank also directed banks to recover outstanding debts by enforcing collateral recovery and seizing shareholdings of affected directors.
Furthermore, banks must regularise all insider-related facilities within 180 days, particularly those that exceed limits prescribed in Section 19 (5) of the Banking and Other Financial Institutions Act (BOFIA), 2020, and were previously approved without specific timelines.
The CBN stated: “Directors with non-performing insider-related facilities are required to step down immediately from the board, while the bank should commence immediate remediation of the loans through the recovery of the collaterals, including the shareholdings of the affected directors.”
It also stressed the importance of compliance with Section 19 of BOFIA 2020, which limits insider-related loans:
“Banks are required to regularise within 180 days, all insider-related facilities above the limits prescribed in Section 19 (5) of BOFIA, 2020.
“Individual director-related facilities must be brought within the 5 per cent paid-up capital limit, while the aggregate insider facilities for the bank must not exceed 10 per cent of its paid-up capital.”
The CBN emphasized that compliance with these directives is effective immediately to uphold regulatory standards and corporate governance best practices.
Analysts note that insider lending has long been a major corporate governance challenge in Nigeria.
While most Tier 1 banks, which have spent years strengthening governance structures, are expected to comply without major issues, smaller and mid-sized banks may struggle to meet the deadline without significant balance sheet restructuring.
