The Central Bank of Nigeria (CBN) has directed bank directors with non-performing insider-related loans to immediately step down from their positions.

Insider loans refer to loans granted by a bank to its executives, directors, employees, major shareholders, or related parties.

The directive was issued in a circular signed by Adetona Adedeji, Acting Director of Banking Supervision, on Monday.

According to the CBN, the decision is aimed at strengthening corporate governance and improving risk management in the banking sector.

To reduce financial risks, the apex bank instructed banks to take necessary actions, including recovering debts through collateral enforcement and seizing shareholdings of the affected directors.

The circular reads:

“Directors with non-performing insider-related facilities are required to step down immediately from the board, while the bank should commence immediate remediation of the loans through the recovery of the collaterals, including the shareholdings of the affected directors.”

Furthermore, the CBN has directed banks to comply with Section 19 of the Banking and Other Financial Institutions Act 2020 (BOFIA 2020) by ensuring proper regulation of insider-related loans.

The CBN also stated that insider-related facilities approved by the CBN without specific timelines must be regularized within 180 days, ensuring that the loans meet the limits prescribed in Section 19(5) of BOFIA 2020.

The circular added:

“Accordingly, all affected individual director-related facilities should be brought within the prescribed limit of 5 per cent of the bank’s paid-up capital, while the aggregate insider facilities for the bank should not exceed the 10 per cent paid-up capital limit.”

Paid-up capital refers to the total money a company has received from shareholders in exchange for shares.

For insider-related loans that were approved with specific timelines, the CBN stated that all outstanding loans must be regularized within the permitted period.