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December 2008 Vol. 21: Issue 12 It seems that these new regulations
are designed to ensure that the growing
In a recent regulation issued by the foreign interests in the Nigerian banking
Central Bank of Nigeria (CBN), fresh sector do not translate into a foreign
hurdles have been set for foreign banks takeover of the top ten existing local
desirous of merging with or acquiring banks.
any of the existing local banks in the
country. However, the restriction does not
debar foreign banks from setting up
Under the new regulation approved businesses in Nigeria on their own if
by the CBN, if a group of foreign they satisfy the N25 billion capital base
institutions decides to invest in any of requirement and other statutory
the local banks, the aggregate prescriptions.
investment must not be more than 10
per cent of the latter’s total capital. For foreign banks interested in doing
Further, in a situation where a single business in Nigeria, the restriction is
foreign investor invests in a local bank, limited only to the top ten banks in the
such investment may not exceed the country. Other existing local banks are
holding of the largest Nigerian excluded from this new policy. Foreign
shareholder. banks may therefore merge with or
acquire local banks outside the top-ten
In addition, any foreign-owned bank list. The new regulations permit foreign
in Nigeria desirous of acquiring or banks to acquire or merge with existing
merging with a local bank must have banks which already have structures
operated in Nigeria for a minimum of and branches in place.
five years. To qualify for merger or
acquisition of any of Nigeria’s local It would appear that the regulations are
banks, the foreign bank must have primarily aimed at avoiding a situation
achieved a spread of two-thirds of the in which foreign banks dominate
states of the federation. This provision Nigeria’s financial system and prescribe
mandates that the foreign-owned bank rules on Nigeria’s economic
must have branches in at least 24 out of development.
the 36 states of the federation of Nigeria.
©Blackfriars LLP 2008. All rights reserved. This document is for general guidance only. Definitive advice
should be sought from counsel if required. Blackfriars LLP is a Nigerian law firm with a representative
office in Toronto, Canada.
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©Blackfriars LLP 2008. All rights reserved. This document is for general guidance only. Definitive advice
should be sought from counsel if required. Blackfriars LLP is a Nigerian law firm with a representative
office in Toronto, Canada.