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BEYOND LICENSING – CBN’S DRAFT GUIDELINES FOR FINANCIAL HOLDING COMPANIES IN NIGERIA

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BY ADERONKE ALEX-ADEDIPE AND ENIOLA SOGBESAN

BEYOND LICENSING – CBN’S DRAFT GUIDELINES FOR FINANCIAL HOLDING COMPANIES IN NIGERIA.

Introduction

On 10 June 2026, the Central Bank of Nigeria (CBN) issued an Exposure Draft of the Revised Guidelines for Licensing and Regulating Financial Holding Companies (FHCs) in Nigeria (the “Draft Guidelines”). The Draft Guidelines is the first review of Nigeria’s financial holding company framework since the introduction of the Guidelines for the Licensing and Regulation of Financial Holding Companies in Nigeria 2014 (the “2014 Guidelines”).

The Draft Guidelines seek to:

  1. strengthen the financial resilience of holding companies;
  2. improve group-wide governance and oversight;
  3. clarify ownership and control requirements;
  4. enhance regulatory supervision of financial groups; and
  5. address concerns arising from shared service arrangements and complex group structures.

For existing FHCs, banking groups, investors, and prospective promoters, the Draft Guidelines signal a shift from a regime focused primarily on licensing to one that places greater emphasis on governance, capital adequacy, ownership accountability, and consolidated supervision.

Key Highlights of the Draft Guidelines

  1. Definition and StructureThe Draft Guidelines introduce a clear definition of what constitutes a FHC. Under the Draft Guidelines, a FHC is defined as a non-operating holding company that has two or more direct subsidiaries, one of which must be a bank. The Draft Guidelines further stipulate that a FHC may adopt either a Parent HoldCo or Intermediate HoldCo structure.Under the Parent HoldCo structure, a parent holding company holds direct equity investment in each Nigerian subsidiary, however under the Intermediate HoldCo structure, an intermediate holding company is incorporated for the purpose of holding equity investment in foreign subsidiaries. Accordingly, all existing FHCs are required to notify the CBN of their preferred structure within six (6) months of the effective date of the Guidelines. Also, once the preferred structure is approved by the CBN, such FHC must operate that structure for a minimum of 5 years before it may elect to reverse or alter the approved structure.

    The Draft Guidelines list individuals, non-bank corporate investors and banks [commercial, merchant and non-interest] as eligible promoters of FHCs. This clarification provides greater regulatory certainty for investors considering the use of a holding company structure to expand their presence within Nigeria’s financial services sector.

  1. Permissible and Non-Permissible Activities
    Under the Draft Guidelines, the following activities are permissible for FHCs. These activities include-
    1. holding equity investment in subsidiaries engaged in financial services;
    2. investment in government securities or placement with banks;
    3. with the prior approval of the CBN, raising bonds and debentures;
    4. subject to the prior approval of the CBN, borrowing internationally to capitalize any of its subsidiaries and;
    5. providing either by itself or through any subsidiary, shared services to the group members in respect of facilities, legal and ICT services and other services that may be prescribed by the CBN from time to time.

However, FHCs are prohibited from engaging in the following activities –

    1. investing in entities not involved in financial services;
    2. pledging its shares in any subsidiary as collateral for any purpose;
    3. establishing, divesting or closing any subsidiary without the prior approval of CBN;
    4. interfacing with any customers of its subsidiaries and;
    5. bearing the expense of any of its subsidiaries.
  1. Corporate Governance Requirements
    In addition to the provisions of the Corporate Governance Guidelines for Financial Holding Companies in Nigeria, the Draft Guidelines introduce additional corporate governance rules for FHC’s.Some of these additional corporate governance are –
    1. subsidiaries of FHCs are prohibited from acquiring shares in the FHC and/or other subsidiaries of the FHC;
    2. Nominee companies that are subsidiaries of the FHC are prevented from investing client funds in the FHC or any other subsidiary;
    3. where a FHC loses control in the only or all Nigerian banking subsidiaries for a period that exceeds six (6) consecutive months, its license shall be revoked;
    4. where a FHC that has only two (2) subsidiaries loses control in either subsidiary for a period that exceeds six (6) consecutive months, its license shall be revoked;
    5. No employee of a FHC shall be appointed as a non-executive director in the FHC or any other subsidiary; and
    6. interlocking directorship within a FHC is limited to a maximum of one other company.More importantly, the Corporate Governance rules of the Draft Guidelines are required to be read in conjunction with the Nigerian Code of Corporate Governance 2018, Corporate Governance Guidelines for Financial Holding Companies in Nigeria and where applicable the SEC’s Code of Corporate Governance for Public Companies and Listed Entities in Nigeria.
  1. Intra-Group Transactions, Prudential Requirements & AML/CFT Compliance
    The Draft Guidelines make extensive provisions for intra-group transactions. More specifically, FHCs are prohibited from interfering in the daily operations of their subsidiaries and all transactions with their subsidiaries must be strictly on an arm’s length basis. In particular, the Draft Guidelines expressly prohibit the practice where board members of a subsidiary attend board meetings of the FHC and vice versa.All FHCs are required to maintain a minimum regulatory capital which shall exceed the sum of the minimum regulatory capital of its subsidiaries by at least 20%. In determining what constitutes minimum regulatory capital, the Draft Guidelines provide that only the paid up capital shall be recognized. Additionally, excess capital in one subsidiary shall not be computed to make up for a shortfall in the share capital of another subsidiary.Furthermore, the Draft Guidelines require all FHC’s to comply with all AML/CFT/CPF regulations and to appoint a compliance officer who shall not be below the grade of a senior management staff responsible for filing the required returns with the CBN.

What Should Financial Holding Companies Be Doing Now?

Although the Draft Guidelines remain in draft form, affected institutions should begin evaluating the potential implications of the proposed framework.

Key considerations include:

    1. assessing compliance with the proposed ownership thresholds;
    2. reviewing group structures and foreign subsidiary arrangements;
    3. evaluating shared service models and related documentation;
    4. assessing capital adequacy and funding arrangements;
    5. reviewing governance frameworks and board oversight mechanisms; and
    6. identifying areas that may require regulatory engagement or restructuring.

Conclusion

The Draft Guidelines appears to be more than a routine update of the 2014 Guidelines. It reflects a broader regulatory shift towards stronger governance, clearer ownership structures, enhanced prudential safeguards, and more effective consolidated supervision of financial groups. For financial holding companies and banking groups, the message is clear: regulatory expectations are evolving beyond licensing and corporate structure requirements only.

The practical implication of the Draft Guidelines is that financial holding companies must begin to reassess their governance frameworks, group structures, risk management systems, and compliance functions to ensure alignment with the heightened regulatory standards. As the Central Bank of Nigeria continues to strengthen its supervisory oversight of financial conglomerates, early preparation and strategic compliance will be critical to achieving long-term sustainability and regulatory success.

BANKING AND FINANCE REGULATION IN NIGERIA – INTEREST RATE DETERMINATION, NOFR BENCHMARK

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BY SEUN TIMI-KOLEOLU AND PROMISE ITAH

Introduction

On April 17, 2026, the Central Bank of Nigeria (CBN) announced the introduction of the Nigerian Overnight Financing Rate (NOFR) in collaboration with the Financial Markets Dealers Association (FMDA). The NOFR is a daily benchmark designed to reflect the actual cost of short-term borrowing between banks, based on real market transactions. According to the CBN, the introduction of the NOFR is aimed at enhancing transparency, strengthening monetary policy transmission, and deepening Nigeria’s money market.

In this newsletter, we highlight the rationale and framework of the NOFR, as well as its implications for the market.

What is the Rationale behind the NOFR?

Nigeria’s short-term interest rates have traditionally been guided by the Monetary Policy Rate (MPR) and interbank indicators such as the Open Buy Back (OBB) and Overnight (OVN) rates, which are meant to reflect the cost of overnight borrowing between banks.

However, these indicators do not always reflect actual transactions, as they may be influenced by estimates, limited trading activity, or inconsistent reporting. As a result, they may not accurately capture the true cost of short-term funding.

The Nigerian Overnight Financing Rate (NOFR) was introduced to address this gap by replacing indicative pricing with a benchmark based on actual transactions, thereby improving reliability and market confidence.

What is the Framework of the NOFR?

The NOFR is an average interest rate that reflects the actual cost of overnight lending between banks in naira, where the loans are secured by collateral, and based on real market transactions. The rate is calculated by giving more weight to larger transactions and removing unusually high or low rates (the higher 10% and the lower 10% percent volumes are excluded from the calculation), so that the final figure reflects normal market conditions and provides a more accurate picture of how banks actually price short-term funding.

The transactions used to calculate the NOFR must meet the following conditions:

  1. they must be carried out on the specific day the rate is being calculated (the fixing day);
  2. they must be reported by approved banks;
  3. Each transaction must be at least ₦5 billion, so that only significant market activity is included.

The rate is published daily at 10:00 a.m. for the preceding business day. Where there is insufficient qualifying transaction data, the previous day’s rate is retained and published to ensure continuity and stability. The CBN is responsible for the governance and regular publication of the NOFR. The rate can be accessed on the CBN website.

 

What are the Key Market Implications?

Some key market implications of the introduction of the NOFR are set out below:

  1. Corporate Borrowers: While the NOFR may not immediately reduce borrowing costs, it provides a clear and transparent base rate for floating-rate loans. This makes loan pricing more consistent and easier to compare. Borrowers may seek to review existing loan agreements, especially floating-rate clauses, as pricing will gradually shift to NOFR-based benchmarks, making interest costs more responsive to overall market conditions.
  2. Banks and Financial Institutions: In view of the improved accuracy in pricing short-term loans, banks will have a clearer view of funding costs, enabling more effective day-to-day liquidity management.
  3. Investors: The greater transparency and reliability of the NOFR may make it easier to price and value instruments such as treasury bills and bonds. This is expected to improve pricing consistency across the market and give both local and foreign investors greater confidence in expected returns.
  4. Legal/Contractual Considerations: The introduction of the NOFR means that existing financial agreements referencing older interbank rates or bank-specific pricing may need to be reviewed and updated to reflect the new benchmark. Going forward, new agreements are likely to adopt NOFR as the base rate, with an added margin. This makes it important to include clear provisions on benchmark use and replacement in new agreements.

Conclusion

The introduction of the NOFR marks a significant shift in how interest rates are determined in Nigeria and aligns the country with global benchmarks best practices such as the Secured Overnight Financing Rate (SOFR) in the United States and the Sterling Overnight Index Average (SONIA) in the United Kingdom. While the CBN expects the NOFR to enhance transparency, strengthen monetary policy transmission, and deepen Nigeria’s money market, its impact will ultimately depend on adoption and effective administration.