The Central Bank of Nigeria (CBN) has introduced new regulatory proposals aimed at strengthening corporate governance and improving stability across the country’s financial services industry.
The apex bank released two draft frameworks—the Exposure Draft of Guidelines on Ring-Fencing Operations of Closely Linked Entities and Revised Guidelines for Financial Holding Companies (Holdcos)—designed to close regulatory gaps, safeguard depositors’ funds, and reduce risks within financial groups and their subsidiaries.
The CBN has also invited stakeholders and members of the public to review the exposure drafts and submit feedback before final approval and implementation.
In circulars signed by Director of Financial Policy and Regulation Department, Central Bank of Nigeria, Dr. Rita Sike, the regulator said the proposed framework aims to protect banks from risks originating from affiliated companies, strengthen governance structures, and ensure financial soundness even when related entities experience distress.
According to the CBN, the reforms are intended to prevent challenges in non-banking subsidiaries from spilling over into core banking operations and endangering depositors’ funds.
Under the proposed ring-fencing rules, banks will be required to maintain clear operational, financial, and governance separation from closely linked entities.
Banks will also be restricted from offering preferential financial support to sister companies or engaging in transactions that do not reflect normal market conditions.
“Institutions are expected to maintain arm’s-length relationships with closely linked entities,” CBN stated.
All transactions involving affiliated companies must now be conducted under commercial terms similar to those applied to independent third parties, including lending decisions, pricing, collateral requirements, and risk assessments.
To further strengthen governance, the CBN has proposed restrictions on overlapping executive roles between banks and their affiliated companies. Individuals will no longer be allowed to hold management positions in both institutions simultaneously.
The guidelines also mandate separate boards and independent governance structures for banks and related entities to reduce undue influence from parent companies and major shareholders.
In addition, banks will be required to maintain distinct operational systems, technology infrastructure, and business processes from their affiliates.
The CBN also plans to clearly differentiate banking products from those offered by non-banking subsidiaries, ensuring customers understand that investments in affiliated entities do not carry the same protections as bank deposits.
The draft regulations further prohibit banks from acquiring low-quality or non-performing assets from related companies to artificially improve their financial positions.
The apex bank stressed that banking capital must remain within regulated institutions to support operations and absorb risks, restricting its use for supporting struggling affiliates.
CBN also plans to impose exposure limits on intra-group transactions, alongside stricter reporting requirements covering ownership structures, service agreements, and related-party dealings.
For financial holding companies, the revised guidelines introduce stronger ownership, capital, and governance requirements aimed at aligning Nigeria’s regulatory framework with global standards.
One key provision requires Holdcos to maintain at least a 51 per cent equity stake in each subsidiary under their control to ensure effective oversight and accountability.
CBN also stated that holding companies must register as persons with significant control with relevant corporate authorities to improve transparency.
The framework introduces additional capital requirements, requiring Holdcos to maintain sufficient standalone capital to support subsidiaries during financial stress.
Under the new structure, foreign subsidiaries will now be held directly by the holding company rather than Nigerian banking subsidiaries, a move designed to isolate international risks from domestic banking operations.
The guidelines also impose stricter controls on shared services within financial groups, ensuring all arrangements are conducted on transparent commercial terms and are subject to regulatory scrutiny.
CBN reiterated that financial holding companies must remain non-operating entities focused on ownership and strategic oversight rather than day-to-day management.
“The primary role of a Holdco is to hold investments and provide strategic direction for the group,” the guidelines stated.
Executives of holding companies will also be restricted from participating in daily operations of subsidiaries, which must retain independent management and risk structures.
The CBN urged all affected institutions to review the proposed rules and begin compliance preparations ahead of final implementation, warning that violations could attract sanctions, financial penalties, and possible restructuring measures.
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