On October 12, 2022, the Central Bank of Nigeria ("CBN") released a draft of the Guidelines for the Regulation of Representative Offices of Foreign Banks in Nigeria ("Draft Guidelines"). This is further to the powers of the CBN under the Banks and Other Financial Institutions Act, 2020 ("BOFIA") to mandate foreign banks to seek the prior approval of the CBN before operating in representative offices in Nigeria.
We have highlighted below some notable provisions of the Draft Guidelines that may be useful to foreign banks that wish to operate a representative office in Nigeria.
1. What is an Approved Representative Office of a Foreign Bank ("Representative Office")?
Under the Draft Guidelines, Representative Office is a liaison office of a foreign bank (the "Foreign Bank") licensed by the CBN to market the products and services of the Foreign Bank and serve as liaison between the Foreign Bank and local banks, other financial institutions, private companies, and the general public.
2. Which Foreign Entities will the Draft Guidelines apply to upon Issuance?
Upon issuance, the Draft Guidelines will apply to the following categories of institutions:
- a bank licensed under a foreign law with its registered head office outside Nigeria;
- a financial institution licensed under foreign law and whose primary business includes receiving deposits, granting loans and provisions of current and savings accounts; and
- any foreign-based and foreign-owned operating bank/financial holding company that owns controlling interests in one or more banks or institutions whose primary business is similar to those of a bank.
3. What are the Permitted and Prohibited Activities of a Representative Office?
The Draft Guidelines provides a list of activities which a Representative Office is permitted to carry out in Nigeria. Some of the activities listed under the Draft Guidelines include:
- marketing the products of the Foreign Bank or its licensed affiliate resident outside Nigeria;
- serving as a liaison between a foreign bank and local banks, customers of the Foreign Bank in Nigeria and other private institutions;
- pursuing business opportunities for the Foreign Bank or its affiliate regarding provision and/or syndication of foreign currency denominated loans;
- assisting exporters in Nigeria with information related to the laws and markets of target countries where the Foreign Bank or its affiliate has a subsidiary; and
- connecting exporters in Nigeria with potential customers in jurisdictions where the Foreign Bank operates.
It is important to note that Representative Offices are expressly prohibited from:
- providing services designated as banking business in Nigeria;
- providing or engaging in commercial or trading activity that may lead to the issuance of invoices for services rendered;
- accepting orders on behalf of the Foreign Bank; and
- engaging directly in any financial transaction.
4. What are the Licensing Requirements for a Representative Office?
Foreign banks that wish to establish a Representative Office in Nigeria, are required to apply to the CBN for a license. The procedure for obtaining the license is in three stages, as highlighted below.
- Approval-in-Principle Stage: the applicant is
required to submit a formal application to the Governor of the CBN
accompanied with all the required documents as listed in the Draft
Guidelines including a valid memorandum of understanding between
the CBN and the home supervisory authority; a no objection letter
(or approval) from the home supervisory authority consenting to the
establishment of a representative office; a detailed business plan
or feasibility report; evidence of name reservation with the
Corporate Affairs Commission; and evidence of payment of the
- Final Approval Stage: within 3 months of
obtaining the Approval-in-Principle, the applicant is required to
apply for the grant of a final license by the CBN. The application
should be accompanied with the incorporation documents; names,
addresses and curriculum vitae of the management staff; copies of
letters of offer and acceptance of employment of the management
staff; evidence of payment of license fee amongst other
- Pre-licensing Inspection Stage: prior to the grant of the final license, the CBN will conduct an inspection of the premises and facilities of the proposed representative office. This inspection will include a meeting with the Board members and management officials of the Representative Office, and a check of the physical structure of the infrastructure of the office.
Please note that upon receiving a license from the CBN, Approved Representative Offices will be required to observe reporting and operational requirements as provided under the Draft Guidelines after licensing. The CBN is also to have unfettered access to internal systems, documents and premises of the Representative Offices to ensure compliance with the Guidelines and other applicable laws and regulations at all times.
As the Guidelines are still in draft form, we will update you when the approved Guidelines are issued.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.