New CBN Draft Limits Loans, Guarantees Between Banks, Affiliates

The Central Bank of Nigeria (CBN) has proposed strict limits on lending, guarantees, asset transfers and other intra-group exposures between banks and their affiliated companies to prevent financial stress from spreading across corporate groups.

The measures are in the CBN’s Exposure Draft Guidelines on Ring-Fencing Operations of Closely Linked Entities, signed by the Director of Financial Policy and Regulation, Dr Rita I. Sike, and released to stakeholders for consultation.

Under the draft, transactions between banks and closely linked entities — including fintech affiliates, microfinance institutions and holding companies — must be on arm’s-length terms, fully documented and disclosed to the regulator. The CBN said the aim is to ensure financial problems at one entity do not threaten deposit-taking institutions within the same group.

The draft limits intra-group funding arrangements, guarantees and cross-collateralisation to protect depositors’ funds, and requires closely linked entities to operate independently, maintain adequate capital and liquidity, and keep customer funds separate from group operations.

Boards must adopt formal ring-fencing policies and disclose conflicts of interest.

Cross-directorships will be capped at 20 per cent, and all intra-group transactions must be conducted at market rates and reported to the CBN quarterly. The framework also bars affiliated entities from extending loans or guarantees to one another without prior regulatory approval.

Customer protections include mandatory disclosure when customers are onboarded into products run by related entities and explicit customer consent for sharing data or moving them across group services.

Customer funds are prohibited from being used for intra-group lending, debt servicing or proprietary trading.

The draft tightens oversight of shared services. Affiliated entities must sign service‑level agreements, submit to independent audits of shared arrangements and secure CBN approval where needed. Firms must also maintain business continuity plans, recovery strategies and resolution frameworks aligned with CBN stability objectives.

The CBN said banks must treat affiliated companies like third-party customers, applying market pricing, collateral requirements and contractual terms. It warned that breaches could attract sanctions under the Banks and Other Financial Institutions Act (BOFIA) 2020, including fines, changes to management, or licence withdrawal.

Promoters may be required to set up a non-operating holding company or consolidate operations under a single licence.

The draft is expected to take effect later in 2026 after stakeholder consultations and final regulatory approval.

Context

The ring‑fencing proposal comes as Nigerian financial groups expand into payments, technology and other services, raising concerns that excessive interconnectedness could let losses at non-bank affiliates spill into regulated banking operations. In April 2026, the CBN proposed revisions to its Guide to Charges that introduced fee caps and more disclosure — part of a wider push for a more transparent, consumer-focused and resilient financial sector.