The Central Bank of Nigeria (CBN) has intensified its crackdown on insider lending, prompting some bank owners, shareholders and board members to leave the banking industry as the regulator enforces stricter corporate governance standards.
The CBN’s Director of Banking Supervision, Dr Olubukola Akinnwunmi, disclosed this at the 38th Seminar for Finance Correspondents and Business Editors in Abuja, warning that directors linked to persistent insider-credit violations could lose their board positions.
Although he did not name the affected individuals or financial institutions, Akinnwunmi said the regulator was determined to enforce existing rules and prevent lending practices that expose banks to excessive risks.
Insider credit refers to loans granted to individuals or businesses connected to a bank, including directors, senior executives, major shareholders and companies they own or control.
Akinnwunmi said the CBN’s monitoring had become more rigorous, adding that banks had been warned against retaining directors whose insider-credit exposures continued to violate regulatory requirements.
He stressed that sound corporate governance was essential to maintaining confidence in the banking system and preventing a recurrence of financial distress.
The enforcement drive follows the CBN’s February 2025 circular on insider-related credit facilities, which required banks to address exposures exceeding statutory limits under the Banks and Other Financial Institutions Act (BOFIA) 2020.
Under the directive, banks were given 180 days to regularise insider-related credit facilities that breached the prescribed limits. They were also required to submit periodic reports detailing their insider-lending exposures and compliance measures.
The directive further addressed directors with non-performing insider-related loans, requiring their resignation in line with the regulator’s instructions.
Akinnwunmi’s latest remarks suggest that enforcement has moved beyond issuing directives to applying consequences for non-compliance, including changes in bank ownership and board composition.
CBN links insider lending to banking risks
The banking supervisor warned that recapitalisation alone would not guarantee a stable financial system if lenders failed to address weaknesses in governance, credit decisions and internal controls.
He identified excessive risk-taking, inadequate board oversight and insider abuses among the factors capable of undermining banks’ financial health.
According to him, the CBN’s risk-based capital framework is designed to ensure that banks maintain capital commensurate with the risks they assume, rather than merely meeting minimum capital thresholds.
This means institutions with greater risk exposures, including those arising from insider lending, may face higher capital requirements.
Akinnwunmi cautioned that allowing insider-credit abuses to persist could undermine the gains made through the banking-sector recapitalisation exercise and expose the industry to renewed financial distress.
He said the CBN, under Governor Olayemi Cardoso, would continue to enforce prudential requirements strictly in the interest of banking-sector resilience.
The development places greater responsibility on bank boards and shareholders to ensure that lending decisions comply with regulatory limits and that related-party transactions receive appropriate scrutiny.
The regulator’s position is that stronger capital buffers must be accompanied by effective governance, sound risk management and compliance with lending rules to protect depositors and preserve financial stability.
