The National Bank of Nigeria on Monday, May 8, approved unfamiliar banks in the country to work with their parent organizations in benefiting and partnering unfamiliar cash named advances (dollar credits) to Nigerian organizations.
The policy, according to the apex bank, is consistent with its mandate to support financial system stability. A bank licensed under any foreign law whose registered head office is outside of Nigeria or any financial institution licensed under foreign law whose primary business includes the receipt of deposits, granting of loans, and/or provision of current and savings accounts are covered by the guidelines, which were signed by Muhammad Musa, Director of the CBN’s Director of Financial Policy and Regulation Department.
This includes a foreign-based, foreign-owned operating bank or financial holding company that owns a controlling interest in one or more banks or institutions whose primary business is receiving deposits, making loans, and providing current and savings accounts.
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 prior approval of the CBN,” provide support for the guidelines.
The banks can also sell the goods and services of their foreign parent or an affiliate of their foreign parent that is licensed and based outside of Nigeria.
They are also able to conduct research in Nigeria on the foreign parent’s behalf and act as a liaison between the foreign parent and local banks, private institutions in Nigeria, and other foreign parent customers based in Nigeria.
They are likewise approved to interface banks and other monetary establishments to their parent firm, and help exporters in Nigeria with data connected with the regulations and markets of target nations where the unfamiliar parent or any of the Gathering’s members has an auxiliary.
Some portion of the obligations incorporates grouping and appropriating monetary and monetary data or nation reports to its unfamiliar guardians for use by their clients and helping their clients who want to put resources into Nigeria or work with Nigerian organizations subject to the surviving Information Assurance Guidelines.
Additionally, they are permitted to connect exporters with potential clients in jurisdictions where the parent company operates; also, help Nigerian exporters with tracking down new business sectors through its worldwide workplaces.
The CBN also added
“Insofar as such revenue does not relate to non-permissible activities as set out in section 3.2 below and originates from intra-group services rendered to the parent company, with such revenue taxed in accordance with transfer-pricing regulations, representatives are permitted to record revenue. This provision only makes money for line items like staff costs and fees for leasing business premises.
In Nigeria, banks are not permitted to provide banking-related services or engage in any commercial or trading activity that could result in the issuance of invoices for services rendered.
The CBN stated that a Memorandum of Understanding (MOU) between the CBN and the applicant’s home regulatory supervisor is necessary for the establishment of a representative office in Nigeria. It stated, “The CBN will work with the home regulatory agency to establish/execute an MOU as soon as possible where such an MOU is non-existent.”
The apex bank stated, “The promoters of a proposed office shall submit an application for the grant of a final license to the CBN” within three months of receiving the Approval-In-Principle.