Central Bank of Nigeria To Sanction Banks Assisting Unlicensed Foreign Firms

The Central Bank of Nigeria announced that it will sanction those banks that assist unlicensed foreign firms.

Financial Policy and Regulation Department's director Muhammad Musa signed a circular on Monday, titled "Guidelines for the regulation of representative offices of foreign banks in Nigeria," which revealed that any CBN-regulated entity that supports such operations will get suspended.

"Any CBN regulated entity found to be assisting, supporting, harboring 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 license," the statement said, Punch reported.

The guidelines explained that the representative offices of foreign banks should work in order to showcase the brand and its services in the host country and they can also stimulate foreign direct investment in the country by investing in various opportunities.

"It is in view of these that the Central Bank of Nigeria issues this guideline, to specify the requirements for the licensing and operations of approved representative offices of foreign banks in Nigeria," the statement added.

As per the guidelines, CBN noted that the approved offices shall not engage in the following activities or services:

"Provision of services designated in Nigeria as banking business; provision of any commercial or trading activity that may lead to the issuance of invoices for services rendered; engage directly in any financial transaction; any other activity that may be specified by the CBN from time to time," it stated.

CBN also shared the activities that are permissible for these offices, "Marketing the products and services of its foreign parent or an affiliate of the foreign parent licensed and domiciled outside Nigeria."

The guideline also mentioned that the offices can do research activities in Nigeria on behalf of the foreign parent and serve as a "liaison between the foreign parent and local banks, private institutions within Nigeria and other customers of the foreign parent based in Nigeria."

According to the statement, the representative offices of foreign parent companies are supposed to comply with the guidelines within 180 days.

Nigeria is currently going through a financial crisis since demonetization (currency redesign policy) has mopped up over 70% of cash from the country. Reportedly, it has caused an estimated loss of N20 trillion.

With new guidelines, the foreign exchange company will ensure that there is no direct financial transaction without its knowledge, which will eventually help Nigeria's economy.

CBN's Director of Banking Supervision, Haruna Bala Mustapha promoted the cashless policy last month to promote loan services for MSMEs (Micro, Small, and Medium Enterprises) in Nigeria.