Foreign banks to pay N15m as licensing fee for Nigerian credit outpost

Any foreign bank willing to participate in granting loans to Nigerian companies in dollars would pay a non-refundable application fee of N5 million and another non-refundable licensing fee of N10 million, the Central Bank of Nigeria (CBN) has said.

The participating banks are those that have their headquarters abroad.

The requirement, which was conveyed by the Director of Financial Policy and Regulation Department, Muhammad Musa, as part of ‘the Guidelines for the Regulation of Foreign Bank Representative Offices in Nigeria’, said that the policy corresponds with the CBN’s mandate to maintain financial system stability.

Relying on Sections 6(1) and 8(1) of the Banks and Other Financial Institutions Act 2020 (BOFIA), which say that “no foreign bank shall operate in Nigeria without the prior approval of the CBN”, the bank explained that the guidelines applied to any bank licensed under any foreign law with its registered head office outside Nigeria, as well as any financial institution licensed under any foreign law whose primary business includes the receipt of deposits, granting of loans and/or the provision of current/savings accounts.

The guideline included any foreign-based, foreign-owned functioning bank/financial holding company that owns a controlling stake in one or more banks or institutions whose core business involves accepting deposits, making loans and providing current and savings accounts.

The CBN also granted the banks permission to promote the products and services of their foreign parent or an affiliate of the foreign parent that is licensed and domiciled outside of Nigeria.

The rules stipulate that such entities could also do research in Nigeria on behalf of the foreign parent and operate as a liaison between the foreign parent and local banks, private institutions in Nigeria, and other foreign parent clients situated in Nigeria.

Henceforth, banks are now allowed to connect banks and other financial institutions to their parent company and provide information to Nigerian exporters about the regulations and markets of target countries where the overseas parent or any of the Group’s affiliates has a subsidiary.

The banks are licensed to connect exporters with potential consumers in jurisdictions where the parent firm operates as well as to assist Nigerian exporters in identifying new markets through the parent company’s foreign offices.

In establishing a representative office in Nigeria, the CBN said, a memorandum of understanding (MOU) between the CBN and the applicant’s home regulatory supervisor is required.

It added that where there is no MOU, the CBN will work with the home regulatory agency to establish/execute an MOU as soon as possible.

It added: “Not later than three months after obtaining the Approval-In-Principle, the promoters of a proposed office shall apply for the grant of a final license to the CBN.”

However, the guideline states that banks are not permitted in Nigeria to perform services identified as banking business or to engage in any commercial or trade activity that may result in the production of bills for services rendered.