The Central Bank of Nigeria (CBN) has ordered bank directors with non-performing insider loans to step down immediately. The move aims to curb corporate governance abuses and strengthen financial stability in the banking sector.
In a directive issued on February 17, 2025, the CBN mandated banks to recover collateral, including shares owned by defaulting directors. “Directors with non-performing inside-related facilities are required to step down immediately, while banks must commence immediate remediation,” the letter signed by Adetoa Adedeji, Acting Director of Banking Supervision, stated.
The directive also enforces stricter compliance with insider lending limits under the Banking and Other Financial Institutions Act (BOFIA) 2020. Banks have 180 days to ensure all insider-related loans remain within 5% of the bank’s paid-up capital for individual directors and 10% in aggregate.
Crackdown on Excessive Lending
Insider lending has long been a loophole for bank executives to secure large loans under favorable terms. Some directors reportedly have outstanding obligations of up to $1 billion, far exceeding single-obligor limits. “The CBN is now telling them to pay back and comply with BOFIA limits. We expect strict enforcement,” a senior financial regulator told MoneyCentral.
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The latest action underscores the CBN’s commitment to risk management and accountability. Non-compliant directors risk losing board positions, while banks failing to enforce these rules may face regulatory penalties.
What This Means for the Banking Sector
The CBN’s directive could reshape the governance of Nigeria’s banking industry. Analysts predict increased loan recoveries and improved corporate discipline. “This will restore confidence in the sector and ensure that lending practices prioritize financial stability,” said a banking analyst in Lagos.
Banks are now under pressure to tighten their credit policies and reduce their exposure to insider-related risks. With immediate enforcement in place, industry watchers expect a ripple effect on Nigeria’s financial ecosystem in the coming months.
