Section 1-14 BOFIA 2020

Section 1 to 14 of the Bank and Other Financial Institutions Act 2020 is under Part I (LICENSING AND OPERATION OF BANKS) of the Act.

Section 1 BOFIA 2020

Functions, Powers and Duties of the Central Bank of Nigeria

(1) The Central Bank of Nigeria (hereinafter referred to as “the Bank”) shall have all the functions and powers conferred and the duties imposed on it by this Act.

(2) The Bank may authorise or instruct any officer or employee of the Bank to perform any of its functions, exercise any of its powers, or discharge any of its duties under this Act.

(3) The Bank may, either generally or in any particular case, appoint any person who is not an officer or employee of the Bank, to render such assistance as it may specify in the exercise of its powers, the performance of its functions, or the discharge of its duties under this Act, or the Central Bank of Nigeria Act, or to exercise, perform or discharge the functions and duties on behalf of and in the name of the Bank.

Section 2 BOFIA 2020

Banking Business

(1) No person shall carry on any banking business in Nigeria except it is a company duly incorporated in Nigeria and holds a valid banking licence issued under this Act.

(2) Any person who carries on banking business in Nigeria without a valid licence under this Act is guilty of an offence and liable on conviction to imprisonment for a term of not less than 5 years or a penalty of the higher of N50, 000,000 or two times the cumulative deposits or other amount collected or to both such imprisonment and
fine.

(3) Any person for the purpose of subsection (2) of this section, includes: a body corporate, its promoters, its directors, its managers, or officers that are in any way connected with superintending, directing or managing the affairs of the company.

(4) For the purpose of refunding the deposits to account holders in subsection (2) of this section, the bank may direct that the moneys be deposited with a licenced bank appointed for that purpose who will undertake the refund and report thereon to the Bank.

(5) For the purposes of this Act, a person shall be deemed to be receiving money as deposits and thus, conducting banking business –
(a) if the person accepts deposits from the general public as a feature of its business or if the person solicits for deposits orally, electronically or through any form of advertisement or otherwise by any other means; or
(b) if the person receives moneys as deposits which are limited to fixed amounts, or for which certificates or other instruments are issued in respect of any such amounts providing for the repayment to the holder thereof either conditionally or unconditionally of the amount of the deposits at specified or unspecified
dates, or for the payment of interest, dividend, profit or fees on the amounts deposited at specified intervals or otherwise, or that such certificates are transferable:

Provided that the receiving of moneys against any issue of shares, debentures or non-interest bearing instruments offered to the public in accordance with any enactment in force within the Federation shall not be deemed to constitute receiving moneys as deposits for the purpose of this Act.

Section 3 BOFIA 2020

Application for grant of Licence

(1) Any person desiring to undertake banking business in Nigeria shall apply in writing to the Governor for the grant of a licence and shall accompany the application with the following:
(a) a feasibility report for the proposed bank including financial projections for at least 5 years;
(b) a draft copy of the memorandum and articles of association of the proposed bank;
(c) a list of the shareholders, directors and principal officers of the proposed bank and their particulars;
(d) where the application is in relation to non-interest banking, a list of experts on non-interest banking or finance that will serve as its advisory committee of experts;
(e) the prescribed application fee; and
(f) such other information, documents and reports as the Bank may, from time to time; specify.

(2) After the applicant company has provided all such information, documents and reports as the Bank may require under subsection (1) of this section, the shareholders of the proposed bank shall deposit with the Bank, a sum equal to the
minimum paid-up share capital that may be applicable under section 9 of this Act.

(3) Upon the payment of the sum referred to in subsection (2) of this section, the Governor may with the approval of the Board, issue a licence with or without conditions or refuse to issue a licence and the Governor need not give any reason for such refusal.

(4) Where a licence is granted, the Bank shall duly notify the applicant and upon being notified, the applicant shall pay the prescribed licence fee within the time stipulated by the Bank.

(5) Any foreign bank or other entity which does not have a physical presence in its country of incorporation, or which is not licensed in its country of incorporation and which is not affiliated to any financial services group that is subject to effective consolidated supervision, shall not be permitted to operate in Nigeria, and no Nigerian bank shall establish or continue any relationship with such bank or other entity.

(6) Any bank that breaches the provisions of subsection (5) of this section is liable to a penalty of not less than N20,000,000 and to an additional penalty of N500,000 for each day the infraction continues.

Section 4 BOFIA 2020

Investment and release of prescribed Minimum Share Capital

(1) The Bank may invest any sum deposited with it pursuant to section 3 (2) of this Act in treasury bills or such other securities or where the sum is deposited in pursuance of an application for a non-interest bank, in non-interest bearing
securities or similar non-interest banking compliant product or investment, until such a time as the Governor shall decide whether or not to grant a licence.

(2) Where the sum deposited in pursuance of section 3 (2) of this Act is invested in pursuance of subsection (1) of this section, and:
(a) a licence is not granted, the Bank shall repay the sum deposited to the applicant, together with the investment income after deducting administrative expenses and tax on the income;
(b) a licence is granted, the Bank shall repay the sum deposited to the licenced institution together with the investment income and the investment income shall be treated as income of the licenced institution.

Section 5 BOFIA 2020

Power to Revoke or vary conditions of Licence

(1) The Bank may vary or revoke any condition subject to which a license was granted or may impose fresh or additional conditions to the grant of a license.

(2) Where the grant of a license is subject to conditions, the bank shall comply with those conditions to the satisfaction of the Bank within such period as the Bank may deem appropriate in the circumstances.

(3) Any bank which fails to comply with any of the conditions of its licence shall be liable to a penalty of not less than N20,000,000, and to an additional penalty of N500,000 for each day during which the condition is not complied with.

(4) Where the Governor proposes to vary, revoke or impose fresh or additional conditions on a licence, the Governor shall, before exercising such power, give notice of this intention to the bank concerned and give the bank an opportunity to make representation to him thereon.

(5) Any bank which fails to comply with any fresh or additional condition imposed in relation to its licence, shall be liable to a penalty of not less than N5,000,000 and to an additional fine of N100,000 for each day during which the fresh or
additional condition is not complied with.

(6) Any person who, being a director, manager or officer of a bank fails to take reasonable steps to secure compliance with any of the conditions of the licence of the bank is guilty of an offence and liable on conviction to imprisonment for a term not less than 3 years or a fine of not less than N2,000,000 or for both such imprisonment and fine.

Section 6 BOFIA 2020

Opening and closing of branches

(1) No bank may open or close any branch office, cash centre or representative office anywhere within or outside Nigeria except with the prior written consent of the Bank.

(2) Any bank intending to close any of its branches or subsidiaries outside Nigeria shall give notice in writing to the Governor, of its intention, at least six months before the date of the intended closure, or within such shorter period as
the Governor may, in any particular case, allow.

(3) The Bank may direct any bank to divest from any of its subsidiaries where the Bank determines that any such continued investment of a bank imperils the financial health of the bank, or where the Bank determines that the oversight by the bank, or supervision by the host regulator over such subsidiary is not adequate relative to the risks the subsidiary presents, or if the Bank cannot gain access to the information required to assess the risk posed to a bank by such subsidiary on a continuous basis.

(4) Any bank which contravenes the provisions of subsections (1) or (2) of this section or which fails to comply with a directive of the Bank made pursuant to subsection (3) of this section shall be liable to a penalty of not less than N5,000,000 and an additional penalty of N100,000 for each day during which the contravention continues.

(5) Without prejudice to the provisions of subsection (4) of this section, the Governor may order –
(a) the closure of any branch office, cash centre or representative office or any other banking outlet opened without the prior written consent of the Governor in contravention of subsections (1) or (2) of this section; or
(b) the re-opening of any branch office, cash centre or representative office or any other banking outlet closed without the prior written consent of the Governor in contravention of subsection (1) of this section.

Section 7 BOFIA 2020

Restructuring, reorganization, merger and disposal, etc. of Banks

(1) Except with the prior written consent of the Governor, no bank shall enter into an agreement or arrangement-
(a) which results in:
(i) a change in the control of the bank; or
(ii) the transfer of a significant shareholding in the bank;

(b) for the sale, disposal or transfer howsoever, of the whole or any part of the business of the bank;
(c) for the amalgamation or merger of the bank with any other person;
(d) for the restructuring, reconstruction or reorganisation of the bank; or
(e) to transfer the whole or any part of the business of the bank to any such agent.

(2) Where any bank proposes to enter into any agreement or arrangement under subsection (1) of this section, the Bank may on the application of any of the banks to be affected, order separate meetings of the banks to be summoned in such manner as the Bank may direct.

(3) Any transaction in contravention of the provisions of subsection (1) of this section shall be void and any transfer of interest thereunder shall be ineffectual except where such transaction is subsequently ratified in writing by the Bank.

(4) The Bank may approve an agreement or an arrangement covered by subsection (1) of this section if and only if the Bank is satisfied that —
(a) such agreement or arrangement is not likely to cause a restraint of competition, or tend to create a monopoly in the banking industry;
(b) the significant shareholders or directors of the bank that results from the agreement or arrangement are not disqualified under section 47 of this Act;
(c) the agreement or arrangement is consistent with public interest; and
(d) the bank that results from the agreement or arrangement meets the capital requirements prescribed pursuant to sections 9 and 13 of this Act.

(5) Upon the grant of a new banking licence by the Bank to a bank which results from the agreement or arrangement in subsection (1) of this section, all the assets and liabilities of the banks that are parties to the agreement or arrangement shall, by virtue of the grant of the new banking licence, be transferred to and become the assets and liabilities of the new bank.

(6) The provisions of this Act shall apply notwithstanding the provisions of the Federal Competition and Consumer Protection Act.

(7) Any person who breaches the provisions of subsection (1) of this section is liable to a penalty of not less than N20,000,000 and in the case of a continuing breach, to an additional penalty of N500,000 for each day during which the breach continues.

Section 8 BOFIA 2020

Operations of Foreign Banks in Nigeria and Offshore Banking

(1) Except with the prior approval of the Bank, no foreign bank shall operate branch offices or representatives offices in Nigeria

(2) Without prejudice to the provisions of Nigeria Processing Zones Authority Act or any other related enactment or law, the Bank may subject to such-conditions as it may impose, from time to time, grant to any bank registered in Nigeria or a foreign bank a licence to undertake domestic or off-shore banking business within a designated free trade or special economic zone in Nigeria.

(3) No bank or other person shall undertake offshore banking business from Nigeria except with the prior approval of the Bank.

(4) For the purpose of subsections (2) and (3) of this section, the term offshore banking means the provision from within Nigeria of cross-border intermediation of funds and or the provision of banking and financial services to non-residents of Nigeria, other than non-residents that are Nigerian citizens.

(5) Subject to the provisions of subsection (1) of this section, nothing in the provisions of the Nigerian Investment Promotion Commission Act or any other law or enactment, shall be construed as authorising any person whether as a citizen of Nigeria or a non-Nigerian to carry on any banking business in Nigeria without a valid banking licence issued by the Bank under this Act.

(6) Any person who contravenes the provisions of subsections (1) or (3) of this section is guilty of an offence and shall be liable on conviction to a fine of not less than N10,000,000, and every director of any such foreign bank or bank shall
be liable to imprisonment for a term of not less than 3 years or a fine of not less than N2,000,000 or to both such imprisonment and fine.

Section 9 BOFIA 2020

Minimum paid-up share capital of banks and compliance with the minimum paid-up share capital requirement

(1) The Bank shall, from time to time, determine the minimum paid-up share capital requirement of each category of banks licenced under this Act which shall be complied with by each bank within the time prescribed by the Bank.

(2) Any failure to comply with the provisions of subsection (1) of this section within such period as may be determined by the Bank, from time to time, shall be a ground for the revocation of any licence issued pursuant to the provisions of this Act or any other Act repealed by it.

Section 10 BOFIA 2020

Shareholder’s Voting Rights to be Proportional to Shareholding

Notwithstanding the provisions of the Companies and Allied Matters Act or any agreement or contract, the voting rights of every shareholder in a bank shall be proportional to individual contributions to the paid-up share capital of the bank.

Section 11 BOFIA 2020

Restriction of legal proceedings in respect of shares held in the name of another

Notwithstanding anything contained in any law or in any contract or instrument, no suit or other proceedings shall be maintained against any person registered as the holder of a share in a bank on the ground that the title to the said share is vested in any person other than the registered holder:

Provided that nothing in this section shall bar a suit or other proceedings on behalf of a minor or person suffering from any mental illness on the ground that the registered holder holds the share on behalf of the minor or person suffering
from the mental illness.

Section 12 BOFIA 2020

Revocation of Banking licence

(1) Notwithstanding the provisions of this Act or any other law, the Governor may with the approval of the Board and by notice published in the Gazette, or print and electronic media, revoke any licence granted under this Act if a bank:
(a) ceases to carry on in Nigeria, the type of banking business for which the licence was issued for any continuous period of six months or any period aggregating six months during a continuous period of twelve months;
(b) goes into liquidation or is wound up or otherwise dissolved;
(c) fails to fulfil or comply with any condition subject to which the licence was granted;
(d) has insufficient assets to meet its liabilities;
(e) conducts its business in an unsound manner or its directors engage in unsafe practices;
(f) is involved in a situation, circumstance, action or inaction which constitutes a threat to financial stability; or
(g) fails to comply with any obligation imposed upon it by or under this Act or the Central Bank of Nigeria Act or any other rules, regulations, guidelines or directives made hereunder;
(h) is in the opinion of the Bank critically undercapitalized with a capital adequacy ratio below the prudential minimum or such other ratio as the Bank may prescribe from time to time;
(i) fails to commence banking operations within a period of twelve months following the grant of a licence; or
(j) fails to comply with the provisions of sections 9 or 13 of this Act.

(2) Where the licence of a bank has been revoked pursuant to this Act, and the Governor is satisfied that it is in the public interest to do so, the Governor may, subject to the approval of the Board and without waiting for any period
prescribed for doing anything under this Act or any law to lapse, appoint the Nigeria Deposit Insurance Corporation (hereinafter referred to as “the Corporation”) as a liquidator of the affected bank and the Corporation shall have the powers conferred on a liquidator by or under the Companies and Allied Matters Act and shall be deemed to have been appointed a liquidator by the Federal High Court for the purpose of this Act.

(3) Notwithstanding the provisions of this Act, the Companies and Allied Matters Act or any other law, where the Bank has revoked any licence granted under this Act, and the Bank has appointed the Corporation as a liquidator pursuant to subsection (2) of this section, the Corporation shall immediately proceed with the liquidation of the bank whose licence has been revoked and the payment of assured deposit liabilities pursuant to the Nigeria Deposit Insurance Corporation Act.

(4) An action to challenge the revocation of the licence of a bank, specialised bank or other financial institution on any ground whatsoever shall only be instituted in the Federal High Court and such action and any appeal arising therefrom shall be heard and determined on an expedited and accelerated basis.

(5) No action in respect of the revocation of the licence of a bank, specialised bank or other financial institution shall be filed or maintained unless such action is filed within a period of thirty days from the date of the revocation.

(6) Notwithstanding the provisions of this Act or any other enactment, no restorative or like order howsoever described, shall be granted against the Bank or the Governor in any action, suit or proceedings in relation to the revocation of a licence by the Bank under this Act, and the remedy of any claimant or applicant against the Bank or the Governor in any such action, suit or proceedings is limited to monetary compensation not exceeding the equivalent of the value of the paid-up capital of the bank at the time of the revocation of its licence.

Section 13 BOFIA 2020

Minimum capital ratio

(1) A bank shall maintain, at all times, capital funds unimpaired by losses, in such ratio to all or any assets or to all or any liabilities or to both such assets and liabilities of the bank and all its offices in and outside Nigeria as may be specified by the Bank.

(2) Notwithstanding subsection (1) of this section, the Bank may prescribe a higher or lower capital adequacy ratio with respect to any category of banks.

(3) The Bank may require a bank to maintain additional capital as the Bank considers appropriate in respect of specific risks.

(4) The Bank may require a bank that has —
(a) a holding company;
(b) a subsidiary; or
(c) a holding company and a subsidiary:
(d) to calculate and maintain minimum capital adequacy ratio on a consolidated basis.

(5) Any bank which fails to observe any such specified ratios may be prohibited by the Bank from —
(a) advertising for or accepting new deposits;
(b) granting credit or finance and making investments;
(c) paying cash dividends to shareholders;
(d) paying bonus to its directors, other than the approved emoluments and/or benefits; or
(e) engaging in any other activities as the Bank may specify from time to time.

(6) Notwithstanding the provisions of subsection (5) of this section, the Bank shall have power to impose such additional holding actions, prohibitions and conditions as it may deem fit for failure to comply with the specified capital adequacy
ratio.

(7) In addition, the bank may be required to draw up within a specified time, a capital reconstitution plan acceptable to the Bank.

Section 14 BOFIA 2020

Minimum holding of cash reserves, specified liquid assets, special deposits and stabilisation securities

(1) Every bank shall maintain with the Bank, cash reserves, and special deposits or any non-interest banking instruments as may from time to time be approved by the Bank and hold specified liquid assets or other securities, as the case may be, not less in amount than as may, from time to time, be prescribed by the Bank by virtue of section 45 of the Central Bank of Nigeria Act.

(2) Where both assets and liabilities are due from and to other banks, they shall be offset accordingly, and any surplus of assets or liabilities shall be included or deducted, as the case may be, in computing specified liquid assets.

(3) In the case of the long-term advances to a bank or by an overseas branch or office of a bank, the advances may, with the approval of the Bank, be excluded from the demand liabilities of the bank.

(4) Every bank shall —
(a) furnish within the specified time, any information required by the Bank to satisfy the Bank that the bank is observing the requirements of subsection (1) of this section;
(b) not allow its holding of cash reserves, specified liquid assets, special deposits and securities to be less than the amount which may, from time to time, be prescribed by the Bank; and
(c) not during the period of any deficiency, grant or permit increases in advances, loans or credit facilities to any person without the prior approval in writing of the Bank.

(5) Any bank which fails to comply with any of the provisions of subsection (4) of this section, is liable to a penalty of not less than N5,000,000 and an additional penalty of N100,000 for each day during which the contravention continues.

(6) For the purpose of this section, specified liquid assets provided they are freely transferable and free from any lien or charge of any kind shall, without prejudice to the provisions of section 45 of the Central Bank of Nigeria Act, consist of all or any of the following —
(a) currency notes and coins which are legal tender in Nigeria;
(b) balances at the Bank;
(c) net balances at any licenced bank (excluding uncleared effects) and money at call in Nigeria;
(d) treasury bills, treasury certificates and any non-interest banking instruments as may from time to time be approved by the Bank issued by the Federal Government;
(e) inter-bank placement, inland bills of exchange and promissory notes re-discountable at the Bank;
(f) other securities issued by the Federal Government with such dates of maturity as may be approved by the Bank;
(g) negotiable certificates of deposit approved by the Bank; and
(h) such other negotiable instruments as may, from time to time, be approved by the Bank for the purpose of this section.