The Central Bank of Nigeria (CBN) has proposed tighter restrictions on loans, guarantees, asset transfers and other transactions between banks and their affiliated companies in a move to strengthen financial stability and protect depositors’ funds.
The proposal, contained in the draft Guidelines on Ring-Fencing Operations of Closely Linked Entities, seeks to prevent financial troubles in one company within a group from spilling over to regulated banking institutions.
Under the framework, transactions between banks and related entities—including fintech subsidiaries, microfinance banks and holding companies—must be conducted on arm’s-length terms, fully documented and disclosed to the regulator.
The CBN stated that closely linked entities must operate independently, maintain adequate capital and liquidity, and keep customer funds separate from their group operations. Intra-group funding, guarantees and cross-collateral arrangements will face stricter limits to reduce contagion risks.
To strengthen corporate governance, the regulator proposed capping cross-directorships among affiliated entities at 20 per cent, while all intra-group transactions must be priced at market rates and reported quarterly. Loans or guarantees between related entities will also require prior regulatory approval.
The draft guidelines further mandate customer consent before onboarding them to products offered by related companies and prohibit the use of customer funds for intra-group lending, debt servicing or proprietary trading activities.
The framework also introduces tighter controls on shared services, requiring formal service agreements, independent audits and, where necessary, CBN approval. Financial groups must maintain business continuity, recovery and resolution plans in line with the apex bank’s financial stability objectives.
In addition, institutions must comply with the Nigerian Data Protection Act by segregating customer data and obtaining explicit consent before sharing information across affiliated entities.
The CBN warned that violations could attract sanctions under the Banks and Other Financial Institutions Act (BOFIA) 2020, including fines, management changes or licence revocation.
Expected to take effect later in 2026 after stakeholder consultations, the proposed rules form part of broader regulatory reforms aimed at improving transparency, consumer protection and resilience across Nigeria’s financial system.
