CBN Enforces Stricter Lending Rules, Caps Foreign Subsidiary Investments at 10% of Shareholders’ Funds

The Central Bank of Nigeria has intensified enforcement of banking regulations, requiring lenders to hold capital that matches their risk exposure and tightening controls on insider lending, corporate governance and large loans.

Dr Olubukola Akinwunmi, Director of Banking Supervision at the CBN, disclosed this at the 37th Finance Correspondents Association of Nigeria (FICAN) Conference in Abuja. He said the risk-based capital framework, introduced in March 2026, was designed to strengthen banks after the recent recapitalisation exercise and reduce the likelihood of another industry-wide capital-raising exercise.

Risk-based capital rules

Akinwunmi explained that the framework moves beyond a uniform minimum capital requirement by considering each bank’s business model and risk profile. Lenders with greater exposure to potential losses must maintain sufficient capital to withstand financial shocks.

The framework is anchored on Sections 13 and 63 of the Banks and Other Financial Institutions Act (BOFIA). It requires stress tests covering foreign exchange exposure, concentrated lending, deteriorating loan quality and governance failures. Banks will also be assessed against adverse economic conditions, sector-specific disruptions and risks arising from complex business operations.

Insider lending and governance

The CBN director said insider-related lending would attract particularly strict scrutiny because of its potential to weaken banks’ financial positions. The regulator is strengthening corporate governance oversight by examining the qualifications, experience and integrity of bank directors and senior executives.

According to him, weak board supervision, reckless lending, insider abuses and ineffective internal controls have contributed to banking failures in Nigeria and elsewhere. The CBN is enforcing its Insider Credit Circular issued in February 2025. Some bank owners, shareholders and board members have left their positions amid concerns over insider lending. Akinwunmi warned that continued violations could affect the eligibility of certain individuals to serve on bank boards.

Foreign units and digital supervision

Akinwunmi clarified that the CBN has not introduced a new restriction preventing Nigerian banks from expanding into other African countries. Instead, the regulator is enforcing an existing rule limiting investments in foreign subsidiaries to 10% of a bank’s shareholders’ funds. The CBN wants strict compliance and wants banks to avoid exposing newly raised capital to excessive offshore investment risks.

The CBN has also introduced a digital Supervisory Examination Application to improve bank inspections and make supervisory decisions more transparent. The platform will allow examiners to conduct much of their work digitally and create records showing how assessments and regulatory decisions were reached. It will also help preserve the experience of retiring examiners, with artificial intelligence-enabled tools potentially making their expertise available to younger supervisors.

Borrowing costs still wide

Earlier data on the CBN’s September lending rates showed a wide gap between banks. Stanbic IBTC’s maximum lending rate reached 60%, while Guaranty Trust Bank’s prime rate was just 3%. The Monetary Policy Rate was cut to 23%. The gap shows how sharply borrowing costs can vary between banks and customers.

For Nigerian businesses, the CBN’s stance points to closer scrutiny of large loans and insider deals, even as credit conditions differ widely across lenders. Banks will face more pressure to align capital, governance and offshore investments with their risk profiles.