CBN approves dollar loans for Nigerians

The Central Bank of Nigeria (CBN) has authorised foreign banks to give loans to Nigerians and companies operating in Nigeria in dollars. The move is aimed at expanding dollar liquidity in the country by allowing foreign bank representatives to work with their parent firms in obtaining and syndicating foreign currency-denominated loans to Nigerian companies.

According to the Guidelines for the Regulation of Foreign Bank Representative Offices in Nigeria, the CBN stated that the policy aligns with its mandate to maintain financial system stability. It is also supported by Sections 6(1) and 8(1) of the Banks and Other Financial Institutions Act 2020 (BOFIA), which stipulate 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 foreign 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.

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. In establishing a representative office in Nigeria, the CBN has stated that a Memorandum of Understanding (MOU) between the CBN and the applicant’s home regulatory supervisor is essential, and if non-existent, the CBN will work with the home regulatory agency to establish/execute an MOU as soon as possible.