The apex bank adopted this measure to expand dollar liquidity in Nigeria through foreign bank representatives by authorising foreign banks to work with their parent firms in obtaining and syndicating foreign currency-denominated loans (dollar loans) to Nigerian companies.
The Central Bank of Nigeria (CBN) on Monday granted foreign banks permission to give loans to Nigerians and companies operating in Nigeria in dollars.
The apex bank adopted this measure to expand dollar liquidity in Nigeria through foreign bank representatives by authorising foreign banks to work with their parent firms in obtaining and syndicating foreign currency-denominated loans (dollar loans) to Nigerian companies.
The Guidelines for the Regulation of Foreign Bank Representative Offices in Nigeria, signed by the Director of Financial Policy and Regulation Department, Muhammad Musa, stated that the policy corresponds with the CBN’s mandate to maintain financial system stability.
He stated that the rules are supported by Sections 6(1) and 8(1) of the Banks and Other Financial Institutions Act 2020 (BOFIA), which stipulate that “no foreign bank shall operate in Nigeria without the prior approval of the CBN.”
The guidelines apply 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, the granting of loans, and/or the provision of current and savings accounts, according to the CBN.
It also includes 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 licenced and domiciled outside of Nigeria.
They can 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.
Banks can also 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.
Part of the responsibilities include gathering and disseminating economic and financial information or country reports to its foreign parents for use by their customers, as well as assisting their customers who want to invest in Nigeria or do business with Nigerian companies in accordance with the current Data Protection Regulations.
They are also licenced 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.
“Representative offices are permitted to record revenue, in so far as such revenue does not relate to non-permissible activities as set out in section 3.2 below and emanates from intra-group services rendered to the parent company with such revenue taxed in accordance with transfer-pricing regulations. Revenue in this provision is limited to line items such as staff costs and business premises leasing fees,” the CBN said.
Banks, however, 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.
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 essential. “Where such an MOU is non-existent, the CBN will work with the home regulatory agency to establish/execute an MOU as soon as possible,” it said.
“Not later than three months after obtaining the Approval-In-Principle, the promoters of a proposed office shall submit an application for the grant of a final license to the CBN,” the apex bank said.
