CBN proposes stricter regulation of banks, affiliated companies’ business dealings

The Central Bank of Nigeria (CBN) has issued draft guidelines that would impose stricter controls on transactions between banks, financial institutions and their affiliated entities as part of efforts to protect depositors’ funds, strengthen consumer protection and reduce risks within the financial system.
The proposed ‘Guidelines on Ring-Fencing Operations of Closely Linked Entities in the Nigerian Financial System’ seek to establish clear operational and functional boundaries among entities under the same corporate group and prevent the commingling of activities across different licence categories.
In a circular signed by the Director of the Financial Policy and Regulation Department, Dr Rita Sike, the apex bank said the framework was developed to promote a safe, sound and stable financial system, safeguard consumer interests and strengthen regulatory oversight.
According to the CBN, the guidelines prescribe requirements relating to governance, intra-group transactions, segregation of customer funds and data, operational independence, recovery and resolution planning, and consolidated supervision.
“The guidelines are intended to strengthen consumer protection, enhance transparency and accountability, mitigate contagion risks among closely linked entities, and preserve financial stability while supporting innovation and fair competition within the financial services sector,” the bank stated.
Under the proposed framework, boards of closely linked entities would be required to ensure that such entities operate independently and maintain separate governance, risk management and control structures. Each entity would also be expected to have a dedicated board and establish policies that ring-fence its operations from those of affiliated companies.
The CBN also proposed limits on overlapping leadership roles within financial groups, stating that the number of directors serving simultaneously on the boards of closely linked entities should not exceed 20 per cent of the total board membership.
To strengthen oversight, the draft guidelines require external auditors to certify annually the effectiveness of board-approved policies and processes designed to ensure operational independence.
The apex bank further proposed that all intra-group transactions must be conducted on arm’s-length terms and reported to the regulator on a quarterly basis.
It also stated that no closely linked entity should extend a loan to, or guarantee the obligations of, another affiliated entity without prior written approval from the CBN.
“The boards of closely linked entities shall ensure that transactions between such entities are conducted at arm’s length and are properly documented,” the draft stated.
The guidelines place significant emphasis on customer onboarding and consumer protection. Where customers choose services offered by an affiliated company, the receiving entity would be required to establish a direct business relationship with the customer, conduct its own KYC [Know Your Customer] verification and provide account or wallet details where necessary.
The draft also requires affiliated entities to remain adequately capitalised at all times and ensure that critical functions are managed independently.
To reduce operational risks, the CBN proposed restrictions on the use of shared technology infrastructure, as entities would not be allowed to use their information technology platforms to offer services outside the scope of their licences or process transactions on behalf of affiliated entities.
The regulator said it could require the separation of data centres where necessary to reduce contagion risks and ensure that each entity can operate independently.
The framework further seeks to protect customer funds by requiring strict separation of accounts belonging to affiliated entities and daily reconciliation of balances, with discrepancies corrected within 24 hours.
Customer funds would not be permitted for intra-group lending, servicing debts, proprietary trading activities, external borrowings or operational expenses of related entities.
The CBN also proposed tighter controls on customer data, requiring data to be stored independently and prohibiting its sharing among affiliated entities without the explicit consent of customers, except as permitted under the Nigeria Data Protection Act.
“Sharing of customer data between closely linked entities without explicit consent of the customer is prohibited,” the draft guidelines stated.
The proposed framework further requires promoters of closely linked entities to establish a non-operating holding company structure. Such holding companies would be required to maintain regulatory capital at least 20 per cent above the combined minimum capital requirements of their subsidiaries.
However, shareholders unwilling to establish a holding company may choose to merge affiliated entities into a single business, subject to regulatory conditions, including the surrender of excess licences.
The CBN has exposed the draft guidelines for public review and invited stakeholders to submit comments before 9 July 2026.