Central Bank of Nigeria (CBN) has given foreign banks permission to grant loans to Nigerians and companies operating in Nigeria in dollars.

This move by the CBN is aimed at expanding dollar liquidity in Nigeria through foreign bank representatives by authorizing foreign banks to work with their parent firms in obtaining and syndicating foreign currency-denominated 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, stipulates that this policy is in line with the CBN’s mandate to maintain financial system stability.

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The rules are supported by Sections 6(1) and 8(1) of the Banks and Other Financial Institutions Act 2020 (BOFIA), which state 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.

In addition, the CBN has 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.

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.

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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.

They are also 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.

Representative offices are permitted to record revenue, insofar as such revenue does not relate to non-permissible activities 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.

However, 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.

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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.

The promoters of a proposed office shall submit an application for the grant of a final license to the CBN not later than three months after obtaining the Approval-In-Principle.