The Central Bank of Nigeria (CBN) has issued an order requiring bank directors with non-performing insider-related loans to step down immediately.
The directive, which was signed by the Acting Director of Banking Supervision, Adetona Adedeji, aims to strengthen corporate governance and enhance risk management within Nigeria’s banking sector.
Insider loans are loans granted by banks to their own executives, directors, employees, major shareholders, or related parties. The CBN’s move is designed to minimize financial risks and ensure greater accountability in the management of these loans.
The CBN’s circular instructed affected banks to begin debt recovery through the enforcement of collateral and the seizure of the shareholdings of the directors in question. The circular specifically 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.”
In addition, the CBN directed banks to comply with Section 19 of the Banking and Other Financial Institutions Act (BOFIA) 2020, which governs insider-related loans. The banks were instructed to regularize all insider-related facilities above the prescribed limits, ensuring that individual director-related loans do not exceed 5% of the bank’s paid-up capital, and that the aggregate insider facilities for the bank stay within the 10% limit.
For loans that were approved with specific timelines, the CBN emphasized the importance of ensuring that all outstanding loans are regularized within the allowed period.
The move comes as the CBN works to ensure greater transparency and regulatory compliance in Nigeria’s banking system, aiming to protect the stability and integrity of the sector.
