- The Central Bank of Nigeria has asked bank directors connected with non-performing insider loans to step down
- Insider loans have been a recurrent issue in the Nigerian banking sector, often endangering the bank's financial health
- This new directive is to ensure maximum compliance with corporate governance rules and the stipulations in the BOFIA 2020
Legit.ng journalist Ruth Okwumbu-Imafidon has over a decade of experience in business reporting across digital and mainstream media.
In view of the rise in Non-Performing Loans (NPL), the Central Bank of Nigeria (CBN) has ordered bank directors connected to non-performing loans to step down immediately.
This is also part of the bank’s moves to strengthen risk management and corporate governance within the banks and protect shareholders' funds.
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This new directive was contained in a circular from CBN dated February 17, 2025, and signed by Adetona Adedeji, the acting director of banking supervision.
The circular read:
“Directors with non-performing insider-related facilities are required to step down immediately from the board, while the bank should commence immediate remediation of the loans through the recovery of the collaterals including the shareholdings of the affected directors."
Recall that a recent CBN report provided details about the rise in loan defaults, especially in the last quarter of 2024.
In the circular, CBN mandated strict compliance with the insider credit limit provisions detailed in the Banking and Other Financial Institutions Act (BOFIA), 2020.
Banks must recover all debts
In addition to asking the affected directors to step down immediately, the apex bank has also directed the bank management to move to recover all debts immediately.
These loans include credit facilities granted to bank directors, significant shareholders, and their affiliated entities or businesses.
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This may be effected by forcefully taking possession of collateral, or shareholdings belonging to the said directors to recover the debts.
The CBN circular noted that this would mitigate potential risks to the shareholders' funds from the unserviced loans, Premium Times reports.
BOFIA 2020 on insider-related loans
As per the CBN directive, Nigerian banks have 180 days to regularize any insider loans that exceed the stipulated limits.
The BOFIA (2020) Section 19 (5) stipulates that individual directors cannot hold insider loans valued at more than 5% of the bank’s paid-up capital, and all insider-related loans within the bank must not exceed 10% of the bank’s total paid-up capital.
Banks with insider loans exceeding these limits have 180 days to regularize the facilities and ensure full compliance.
Insider loans have been a recurrent issue in the Nigerian banking sector, sometimes endangering the share capital and financial health of the bank.
The most recent action from the CBN is revoking the license of Heritage Bank in 2024 in a bid to uphold regulatory standards.
CBN takes over Keystone Bank
In related news, the CBN took over the management and operations of Keystone Bank after a court order mandated shareholders to forfeit their shares.
Speaking about the takeover, CBN assured depositors that their funds are safe as the bank remains stable and operational. Customers were also encouraged to walk into the nearest branch for further enquiries.
The apex bank also spoke about what customers can expect after the takeover and shared the reasons behind the takeover.
Proofreading by James, Ojo Adakole, journalist and copy editor at Legit.ng.
