The Central Bank of Nigeria (CBN) has mandated that bank directors with non-performing insider-related loans step down immediately. Insider loans refer to loans extended by a bank to its executives, directors, employees, major shareholders, or related entities.
This directive was issued in a circular signed by Adetona Adedeji, the Acting Director of Banking Supervision, on Monday. The CBN stated that the move is aimed at enhancing corporate governance and strengthening risk management within the banking sector.
To mitigate financial risks, the central bank has instructed banks to recover these debts through collateral enforcement and the seizure of shareholdings from the affected directors. The circular reads: “Directors with non-performing insider-related loans are to resign immediately, and the bank must begin immediate remediation by recovering the loans through collateral enforcement, including the shareholdings of the implicated directors.”
Furthermore, the CBN directed banks to comply with Section 19 of the Banking and Other Financial Institutions Act (BOFIA) 2020, ensuring effective regulation of insider-related loans.
For loans approved by the CBN without specific timelines, the CBN has ordered that they be regularized within 180 days, ensuring that individual director-related facilities are brought within the prescribed limit of 5% of the bank’s paid-up capital, while the total insider facilities should not exceed 10%.
The CBN also stated that any insider-related loans approved with specific timelines must be regularized within the allowed period.
