CBN caps payment suspension for troubled banks at two business days

The Central Bank of Nigeria has limited the suspension of payment and delivery obligations involving troubled banks to a maximum of two business days. The new rule takes immediate effect and aims to reduce uncertainty in the financial system while improving confidence among banks, investors, and counterparties.

New rule targets clarity and stability

In a circular dated July 1, 2026, addressed to all banks and financial institutions, the CBN explained that the guidance provides clarity on the implementation of Sections 34(2)(b) and 40(2) of the Banks and Other Financial Institutions Act (BOFIA), 2020. Under Section 34(2)(b), the CBN Governor has the authority to suspend payment or delivery obligations under contracts involving a failing bank. Section 40(2) also empowers the Governor to temporarily prevent counterparties from terminating certain financial contracts when a bank is undergoing resolution.

The regulator noted that the law did not previously specify how long such suspensions could last. This created uncertainty for businesses and financial institutions managing contractual and commercial risks, according to a report by Punch. To address the concern, the apex bank said any suspension of payment obligations or restrictions on the termination of eligible financial contracts must not exceed two business days from the date the written order or notice is issued by the CBN Governor.

Alignment with international standards

According to the circular, the new limit applies whenever the CBN exercises its powers in relation to a failing bank or another financial institution that is either under resolution or proposed for placement under a resolution measure. The regulator said the move aligns Nigeria's bank resolution framework with international best practices by ensuring that temporary intervention measures do not unnecessarily disrupt contractual relationships or financial market activities.

The CBN added that the guidance applies to all affected contracts covered under Sections 34(2)(b) and 40(2) of BOFIA, involving banks and other financial institutions subject to regulatory intervention, a BusinessDay report said. Issued under the powers granted by BOFIA and the Central Bank of Nigeria Act, the circular became effective immediately, providing greater certainty for counterparties while preserving the regulator's ability to intervene swiftly when financial institutions experience distress.

Context of recent bank closures

The clarification comes shortly after the CBN revoked the licences of 46 microfinance banks, underscoring its continued efforts to strengthen financial sector stability. The apex bank, in a statement signed by its Acting Director of Corporate Communications, Hakama Sidi-Ali and released on Wednesday, July 1, highlighted various regulatory breaches, including under-capitalisation and prolonged inactivity, as grounds for the revocation. The CBN stated that the licenses of these microfinance banks were revoked on July 1, 2026, following approval by its Governor, Olayemi Cardoso, in accordance with the provisions of BOFIA, 2020.

For Nigerian businesses and consumers, the two-day cap on payment suspensions means less uncertainty when dealing with financial institutions under regulatory stress. The rule should help maintain trust in the banking system and prevent prolonged disruptions that could affect transactions and contractual obligations.