Nigeria’s banking regulator has issued a sweeping directive mandating commercial banks to comply with stricter insider lending limits or risk regulatory sanctions.
Insider lending is a situation where banks extend credit to their directors, top shareholders, or affiliates.
In a letter to banks, the Central Bank of Nigeria (CBN) set a 180-day deadline for financial institutions to regularize all insider-related credit facilities that exceed the statutory limits prescribed under the Banking and Other Financial Institutions Act (BOFIA) 2020.
The move is part of broader efforts to rein in governance lapses and curb excessive exposure to politically connected or influential insiders, a long-standing issue in Nigeria’s financial sector.
“There’s no doubt that some banks will be forced to unwind large insider positions or seek creative refinancing solutions to meet the deadline,” said a senior banking executive who asked not to be named. “The days of unchecked insider lending are clearly over.”
The directive could also prompt banks to reassess their risk management frameworks, particularly in related-party transactions. Analysts believe that non-compliance could expose banks to heightened regulatory scrutiny, capital adequacy concerns, and potential penalties, further compounding an already challenging macroeconomic environment.