The Central Bank of Nigeria (CBN) has issued an exposure draft of regulatory requirements for the licensing and operations of approved representative offices of foreign banks in Nigeria.
This was disclosed by the apex bank in a recently released circular titled: “Circular to Representative Offices of Foreign Banks in Nigeria, Stakeholders and the General Public”.
The term “bank representative office” refers to a banking unit that does not conduct banking operations and is located in a different location from the bank’s headquarters. Representative offices of foreign banks play a vital role in promoting the parent company’s brand and services. It can also encourage foreign direct investment by connecting funds to numerous investment opportunities in the host country.
What the CBN is saying
The bank said, “The Central Bank of Nigeria (CBN) is empowered by Section 8 of the Banks and Other Financial Institutions Act 2020 (BOFIA) to mandate foreign banks to seek prior approval of the CBN before they can operate in Nigeria. This provision, coupled with requests from foreign banks, law firms, and financial consultants, among others, on the requirements for operating representative offices of foreign banks in Nigeria, has made it pertinent to develop guidelines prescribing the regulatory requirements.”
“Accordingly, the draft guidelines have been developed to provide guidance to stakeholders, particularly foreign banks, seeking to operate in Nigeria,” the bank added.
The exposure draft of the Guidelines was issued for comments and observations. The bank said, “Your comments should be addressed to the Director, Financial Policy and Regulation Department, CBN, with soft copies sent via email to fprd_cedg@cbn.gov.ng within three (3) weeks from the date of this circular, please.”
Key takeaway
- The governor of the Central Bank of Nigeria must receive a formal application from foreign banks and other financial institutions seeking to open an authorized representative office in Nigeria, along with a memorandum of understanding and proof of name reservation with the Corporate Affairs Commission amongst other documents.
- Additionally, the Central Bank of Nigeria would require that foreign banks pay a non-refundable application charge of N5,000,000 and a non-refundable license fee of N10,000,000.
- Foreign banks would not be permitted to perform services classified as banking activity in Nigeria. They would also be barred from engaging in any commercial or trading activity that could result in the production of invoices for services delivered.
- Approved Representative Offices must submit to the Director, Banking Supervision Department of the Central Bank of Nigeria, among other documents, a certificate from a recognized audit firm confirming that no income was received or accrued to the Nigeria office during the fiscal year.
