The Central Bank of Nigeria says stricter enforcement of insider-related credit rules has pushed some bank owners, shareholders and directors out of the banking system. The rules are not new: they rest on section 19 of the Banks and Other Financial Institutions Act 2020 and a February 2025 circular. What has changed is enforcement, which the CBN now describes as being at an “unprecedented level”.
The short answer
- What happened: CBN Director of Banking Supervision Dr Olubukola Akinnwunmi disclosed that some bank owners, shareholders and board members have exited the industry as a result of insider credit enforcement. He did not name individuals or banks.
- Where: the 38th Seminar for Finance Correspondents and Business Editors in Abuja, reported on 9 October 2026.
- Legal basis: section 19 of the Banks and Other Financial Institutions Act 2020 (BOFIA), and the CBN circular of 17 February 2025.
- Core rule: directors with non-performing insider-related facilities must step down from the board immediately.
- Remediation: facilities exceeding statutory limits that the CBN had approved without a compliance timeline had to be regularised within 180 days.
- Next: a risk-based capital framework under which insider exposures will carry capital consequences.
What is insider-related credit?
Insider-related credit is lending by a bank to persons closely connected to it: directors, senior executives, significant shareholders and the companies they own or control. Section 19 of BOFIA regulates such lending and sets the statutory limits that the CBN enforces. Banking regulators treat it as a governance risk because the people approving the loans can be the people receiving them.
The February 2025 circular
The circular, dated 17 February 2025 and signed by Adetona Adedeji, then acting Director of Banking Supervision, set out three requirements, as reported at the time:
- Board exits. “Directors with non-performing insider-related facilities are required to step down immediately from the board.”
- Recovery. Banks must begin immediate remediation of those facilities, including recovery of collateral and of the affected directors’ shareholdings.
- Regularisation. Insider-related facilities exceeding statutory limits, which the CBN had approved without specific timelines, had to be brought into compliance within 180 days.
Nairametrics reports that banks must also submit periodic returns on insider lending exposures and the steps taken to comply. It notes that some earlier CBN approvals without defined compliance timelines had created room for regulatory arbitrage. The circular closed that gap.
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What the CBN said this week
Akinnwunmi said enforcement of insider credit rules, large exposure limits and single obligor limits had reached an unprecedented level, and warned that directors who continue to abuse insider credit risk losing their board seats. He identified excessive risk-taking, insider abuse, poor board oversight, weak credit decisions and ineffective internal controls as recurring causes of bank distress, and said “corporate governance is the bedrock of resilience”.
He added that “bank failures are often preceded by governance weaknesses rather than capital deficiencies alone”. The point is pointed. Nigerian banks have just completed a recapitalisation programme, with a 31 March 2026 deadline. New capital does not cure governance failures, and the regulator is signalling that it will not treat it as if it does.
Why it matters for boards, investors and counsel
- Board composition. Directors with non-performing related-party exposure are now a fitness and propriety issue with an immediate consequence. Nomination committees need current visibility of directors’ connected exposures.
- Shareholder structuring. Significant shareholders who borrow through connected companies face recovery against their shareholdings. That affects the value of the stake and any pledge over it.
- M&A and capital raises. Buyers and new investors in Nigerian banks should diligence insider-related exposures, CBN approvals and the status of any regularisation plan as a priority item.
- Related-party policies. Credit approval for insiders should run through independent directors with full disclosure, and be priced and secured on arm’s length terms.
- Capital planning. Once the risk-based capital framework is in force, insider exposures will consume capital. That changes the economics of related-party lending.
For related coverage, see the CBN’s cap on resolution stays under BOFIA, the reset of the policy rate to 23%, the CBN payments circular on data localisation and NGX supplementary listings linked to recapitalisation.
Frequently asked questions
Which law governs insider lending by Nigerian banks?
Section 19 of the Banks and Other Financial Institutions Act 2020, supplemented by CBN circulars including the circular of 17 February 2025.
Must a bank director with a non-performing loan resign?
Under the February 2025 circular, directors with non-performing insider-related facilities must step down from the board immediately.
Has the CBN named the directors or banks affected?
No. The CBN said owners, shareholders and directors had exited, but did not identify them.
What is the risk-based capital framework?
The CBN has said banks will be required to hold capital reflecting their risk exposures, including insider lending. Its formal terms had not been published at the time of writing.
Sources
- Nairametrics, “CBN insider credit crackdown forces some bank owners, directors out of banking system”, 9 October 2026
- The ICIR, “CBN directs bank directors with non-performing loans to resign”, 18 February 2025
- AllAfrica, “CBN asks bank directors with non-performing insider loans to resign”, 19 February 2025
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