The Central Bank of Nigeria (CBN) has directed all bank directors with non-performing insider-related loans to step down immediately.
The directive was issued in a circular signed by the Acting Director of Banking Supervision, Adetona Adedeji, on Monday, February 17, 2024, According to the apex bank, the measure aims to improve risk management and ensure accountability within financial institutions.
Insider-related loans refer to credit facilities granted by banks to their own executives, directors, employees, major shareholders, or related entities. To prevent potential abuse and conflicts of interest, the CBN has mandated that banks recover outstanding debts by enforcing collateral and seizing the shareholdings of affected directors.
“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,” the circular stated.
Additionally, the CBN instructed banks to comply with Section 19 of the Banking and Other Financial Institutions Act (BOFIA) 2020, which regulates insider-related loans. Banks have been given a 180-day deadline to regularize all insider-related facilities that exceed the legal limit of 5% of a bank’s paid-up capital for individual directors and 10% for aggregate insider facilities.
For insider-related loans previously approved with specific timelines, the CBN stressed that all outstanding debts must be resolved within the permitted period.
This directive marks the latest in a series of regulatory actions by the CBN aimed at restoring confidence in Nigeria’s banking industry and ensuring financial stability.
