The Central Bank of Nigeria (CBN) has introduced new corporate governance guidelines for commercial, merchant, non-interest, and payment service banks in the country. Among the key provisions is a restriction on any investor from acquiring a 5% stake in any bank without obtaining prior approval and a “no objection” from the central bank.

Under the newly implemented regulations, investors seeking to acquire up to 5% ownership in Nigerian banks are required to obtain the necessary approval from the CBN. This move aims to protect shareholders’ rights and address recent events in the capital market that have affected certain commercial banks.

The CBN’s proactive approach to corporate governance in the banking sector reflects its commitment to ensuring transparency, accountability, and stability within the industry. These guidelines serve as a safeguard against potential disruptions and promote responsible investment practices in Nigeria’s banking sector.

“CBN’s prior approval and No Objection shall be sought and obtained before any acquisition of shares of a bank (including through the capital market), that would result in equity holding of five per cent (5%) and above, by any investor.”

The regulation also stated that no one can own controlling stake in more than one bank, except there was a prior approval of the apex bank.

“Except where prior approval of the CBN is granted, no individual, group of individuals, their proxies or corporate entities shall own controlling interest in more than one bank.”

The new regulation also states that where the central bank has an objection to any of the acquisition, the notice of the objection must be communicated to the bank. The bank then has 48 hours to notify

“Where the CBN has an objection on any acquisition as stated in Section 20.2.b above, notice of the objection shall be communicated to the bank, and the bank shall notify such investor(s) within forty[1]eight (48) hours.”

The protection of shareholders rights regulation also extends to government ownership of banks, which it states should not exceed more than 10% (direct and indirect) for a maximum of 5 years.

“Government’s direct and indirect equity holding in a bank shall not be more than ten per cent (10%), which shall be divested to private investors within a maximum period of five years from the date of investment.”

For existing investments above five years, the central bank also gave the government two years from the effective date of the Guidelines to comply with the provision.

“For existing investments above five years, the bank shall within two years from the effective date of this Guidelines, comply with the provision.”

The central bank regulation also addresses Financial Holding Companies (FHC), and activities around mergers and acquisitions.

According to the regulation, no director or shareholder can change control of a bank without the prior approval of the bank. It also does not allow the transfer of 5% and above of a bank to any shareholder without the prior approval of the CBN.

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