The Central Bank of Nigeria (CBN) has taken a decisive action by issuing a ban on representative offices of foreign banks from engaging in banking activities within the country. This move also includes prohibiting these representative offices from participating in any regulated activity or engaging in commercial or trading activities that result in the issuance of invoices for services provided.
The CBN made this announcement in its comprehensive set of guidelines, titled “Guidelines for the Regulation of Representative Offices of Foreign Banks in Nigeria,” which were disclosed recently. The circular, signed by Muhammad Musa, the Director of the Financial Policy and Regulation Department at the CBN, explained that these guidelines were established based on the apex bank’s responsibility to ensure the stability of the financial system within the industry.
According to the CBN, an approved representative office of a foreign bank in Nigeria refers to a licensed liaison office of a foreign bank authorized by the CBN. The primary purpose of such offices is to promote and market the products and services offered by their foreign parent company. Additionally, they serve as intermediaries between the foreign parent bank and local banks, other financial institutions, private companies, and the general public in Nigeria. However, it is important to note that these approved representative offices are strictly prohibited from engaging in any form of banking business or any other regulated activity within Nigeria.
In terms of activities that are not permissible for these representative offices, the CBN stated, “The approved offices shall not engage in the following services/activities: Provision of services designated in Nigeria as banking business; provision of any commercial or trading activity that may lead to the issuance of invoices for services rendered; engage directly in any financial transaction; any other activity that may be specified by the CBN from time to time.”
On the other hand, the CBN outlined the activities that are permitted for these approved representative offices. These include marketing the products and services of their foreign parent company or an affiliated entity that is licensed and based outside of Nigeria. They are also allowed to conduct research activities within Nigeria on behalf of their foreign parent company and serve as liaisons between the foreign parent and local banks, private institutions within Nigeria, and customers of the foreign parent based in Nigeria.
The CBN’s decision to ban representative offices of foreign banks from conducting banking business or any regulated activity in Nigeria is a significant step toward ensuring the stability and integrity of the country’s financial system. By clearly defining the permissible and non-permissible activities for these offices, the CBN aims to promote transparency, accountability, and effective oversight within the banking sector.
