This move is aimed at improving dollar liquidity through
foreign banks’ representatives in Nigeria.
The Director of the Financial Policy and Regulation
Department, Muhammad Musa, signed the Guidelines for the Regulation of
Representative Offices of Foreign Banks in Nigeria, which stated that the
policy is in line with the CBN’s duty to support financial system stability.
He said the guidelines are backed by Sections 6(1) and 8 (1)
of the Banks and Other Financial Institutions Act 2020 (BOFIA) respectively
which state that “no foreign bank shall operate in Nigeria without prior
approval of the CBN”.
According to the CBN, the regulations apply to any financial
institution with a license issued under a foreign law whose registered
headquarters are located outside of Nigeria and whose primary business is the
receipt of deposits, the awarding of loans, and/or the provision of current and
savings accounts.
It also includes any foreign-based functioning bank or
financial holding company with foreign ownership, ownership of a controlling
interest in one or more banks or institutions, and provision of current and
savings accounts as its principal business.
The CBN has also given the banks permission to promote the
products and services of their overseas parent or a subsidiary of that parent
that is registered and headquartered outside of Nigeria.
They can also carry out research activities in Nigeria on
behalf of the foreign parent and also serve as a liaison between the foreign
parent and local banks, private institutions within Nigeria, and other
customers of the foreign parent based in Nigeria.
The banks can also connect banks and other financial
institutions to their parent firm, and assist exporters in Nigeria with
information related to the laws and markets of target countries in which the
foreign parent or any of the Group’s affiliates has a subsidiary.
Part of the responsibilities includes collating and
distributing economic and financial information or country reports to its
foreign parents for use by their customers and assisting their customers who
desire to invest in Nigeria or do business with Nigerian companies subject to
the extant Data Protection Regulations.
They are also authorized to connect exporters with potential
customers in jurisdictions where the parent company operates; and assist
Nigerian exporters with finding new markets through its international offices.
“Representative offices are permitted to record revenue, in
so far as such revenue does not relate to non-permissible activities as set out
in section 3.2 below and emanates from intra-group services rendered to the
parent company with such revenue taxed by transfer-pricing regulations. Revenue
in this provision is limited to line items such as staff costs and business
premises leasing fees,” the CBN said.
However, the banks are not allowed to provide services
designated in Nigeria as banking business and provide any commercial or trading
activity that may lead to the issuance of invoices for services rendered.
In establishing a representative office in Nigeria, the CBN
said a Memorandum of Understanding (MOU) between the CBN and the applicant’s
home regulatory supervisor is essential. “Where such an MOU is non-existent,
the CBN will work with the home regulatory agency to establish/execute an MOU
as soon as possible,” it said.
“Not later than three months after obtaining the
Approval-In-Principle, the promoters of a proposed office shall apply for the
grant of a final license to the CBN,” the apex bank said.