SEUN TIMI-KOLEOLU AND EBIKENIYE BEST
In Nigeria, the importance of a well-regulated banking system cannot be overstated, especially in light of the sector’s influence on economic growth, investor confidence and public trust. To achieve this, a robust regulatory framework has been established, one that combines statutory legislation, institutional oversight and evolving policy guidelines to ensure stability and transparency. Both local and foreign businesses wishing to operate in the banking and fintech sector must understand the regulatory framework.
In-view of the foregoing, we have provided a snapshot of the regulatory framework.
a. Banks and Other Financial Institution Act, (BOFIA) 2020
BOFIA 2020, which replaced the 1991 Act,[1] is the primary law governing Nigeria’s banking sector. It sets out the Central Bank of Nigeria’s regulatory powers, including the issuance and withdrawal of banking licenses, approval of new or closed bank branches, and the restructuring of banks. It also covers the operation of foreign banks in Nigeria and formally recognises digital banking, providing a clear legal basis for regulating fintech activities.[2]
b. The Central Bank of Nigeria Act 2007 (“Act”)
The Act established the CBN which is the primary regulator of the Nigerian banking sector. It is charged with the overall control and administration of banks and other financial institutions in Nigeria. The responsibilities of the CBN include but is not limited to (i) ensuring monetary and price stability; (ii) promoting a sound financial system in Nigeria; (iii) issuing guidelines and circulars relating to its responsibility to banks, foreign exchange market, and other financial institutions.[3]
c. The Companies and Allied Matters Act, (CAMA) 2020
CAMA establishes the Corporate Affairs Commission (CAC), which is charged with the regulatory powers over all registered companies in Nigeria, including banks and other financial institutions. The CAC is responsible for the incorporation of all corporate entities in Nigeria, including banks and other financial institutions; Under CAMA, certain corporate governance principles were introduced which require a public company to have at least three independent directors and prohibit a person from being a director in more than five public companies. These provisions apply to a bank registered as a public company.
d. The Nigerian Deposit Insurance Corporation Act 2006 (“NDIC Act”)
The NDIC Act established the NDIC which provides regulatory oversight over Deposit Money Banks (DMBs), commonly known as commercial banks. The NDIC is responsible for insuring the deposit liabilities of licensed banks and offering financial assistance to insured institutions facing difficulties, in order to protect depositors. It also plays a key role in supporting the formulation and implementation of banking policies by the monetary authorities.
In cases of bank failure, the NDIC is empowered to take over the management and control of the affected institution, ensuring an orderly resolution or closure without disrupting the stability of the banking system.
e. Foreign Exchange (Monitoring and Miscellaneous Provisions) Act, 1995 (FEMM Act)
The FEMM Act establishes the regulatory framework for conducting and controlling foreign exchange transactions in Nigeria. It mandates that transactions in the foreign exchange market be carried out in convertible foreign currencies and specifies the permissible monetary instruments that may be used within the market.
f. The Financial Reporting Council of Nigeria (FRCN) Act 2011
Under the FRCN Act, the FRCN is responsible for developing and enforcing standards on accounting, auditing, corporate governance, and financial reporting. These responsibilities extend to private companies and public interest entities, including banks and other financial institutions, ensuring transparency, accountability, and sound financial practices across the sector.
g. The Investment and Securities Act (ISA) 2025
The ISA establishes the Securities and Exchange Commission (SEC) which regulates capital market activities and public companies in Nigeria. While a licensed bank will not in the ordinary course of its banking activities fall within the regulatory purview of the SEC, where such a bank is a public company or its affiliate undertakes capital market activities, the bank or the relevant affiliate will fall within the SEC’s purview.
h. Nigerian Financial Intelligence Unit (NFIU) Act, 2018
As Nigeria’s central national agency for financial intelligence, the NFIU enforces compliance with anti-money laundering and combating the financing of terrorism. This means that the NFIU ensures that banks and other financial institutions comply with the Money Laundering (Prevention and Prohibition) Act, 2022, Terrorism (Prevention and Prohibition) Act, 2022 and the NFIU operational guidelines.[4]
Conclusion
As Nigeria positions itself in the global financial space, the effectiveness of its regulatory institutions will continue to play a significant role. Companies in the banking and fintech sector are advised to liaise with professional advisers to ensure compliance and facilitate ease of doing business.
Further information, do not hesitate to reach out to us.
[1] https://pavestoneslegal.com/revised-banking-law-in-nigeria-bofia-2020/
[2] https://pavestoneslegal.com/5074-2/
[4] https://pavestoneslegal.com/anti-money-laundering-regulation-in-nigeria-recent-updates/