Challenger banks now have a window to establish a representative office in Nigeria. This is because of the newly proposed CBN Guideline on the Regulation of Representative Offices of Foreign Banks in Nigeria (the “Regulations”).

Although the Regulations also apply to traditional banks, setting up a representative office in a foreign country, is a familiar business strategy for traditional banks. A number of foreign commercial and investment banks, including JP Morgan1 have set up representative offices in Nigeria. Similarly, a number of Nigerian banks have representative offices, set up, overseas.

For the bank representative offices already registered in Nigeria, the Regulations attempt to address some of the gaps in the existing regulatory framework. In particular, the newly proposed regulations clarifies that, the representative office of a foreign bank is prohibited from accepting deposits, lending money or receiving payments for goods and services. A representative office is also prohibited from carrying on other regulated activity.

For foreign challenger banks, establishing a representative office presents an opportunity for strategic customer acquisition and a potential increase in both transaction-related revenues from payments made with cards and non-card instruments and non-transaction- related revenues from sources such as deposit interest, account-maintenance fees, overdrafts and value -added services. We estimate that any one of the number of factors highlighted below will intensify this trend.

  • The increase in the value of cross border payments. The  Bank of England cites an estimated increase in cross border payments from $150 trillion in 2017 to over $250 trillion by 2027, equating to a rise of over $100 trillion in 10 years
  • The increase in payment industry revenues. In a new report,  BCG estimates that global payments revenues will rise by a compound annual growth rate (CAGR) of 8.3% through 2026 and reach $2.3 trillion
  • Global migration, mobility of talent and international remittances. The  world bank estimates that remittance flows to low- and middle-income countries (LMICs) are expected to increase by 4.2 percent in 2022 to reach $630 billion.
  • International trade and e-commerce and generally a maturity of the digital economy

Why Do Foreign Banks Establish Representative Offices?

Foreign banks typically establish representative offices for one or a combination of the following reasons:

  1. Where a foreign bank wants limited presence in a foreign country
  2. As a preliminary step to establishing an operating subsidiary in a foreign country
  3. To establish and facilitate correspondent banking relationships with local banks in a foreign country. Correspondent banking relationships are typically used to facilitate wire instructions and facilitate transactions that either originate or are completed in foreign countries
  4. To demonstrate its knowledge of local markets
  5. To support group companies with operating subsidiaries in a foreign country as well as businesses/HNIs looking to expand or do business in a foreign country
  6. Generally, for business development purposes and to market the products and services of the foreign bank to private and government clients locally
  7. To serve as a liaison between its foreign parent and local banks, other financial institutions, private companies and the general public
  8. To assist exporters in a foreign country with finding new exports markets and promoting exports to its home country
  9. To conduct market research and collect useful economic and financial information about local markets
  10. To pursue business lending and investment banking opportunities for the foreign parent. Some of the typical transactions include cross border syndication of foreign loans, mergers and acquisitions, securitizations and fundraisings

Is there a Requirement for a Foreign Bank to set up a Separate Legal Entity for a Representative Office?

Yes. The implication of this is that, bank representative offices in Nigeria will have residency for corporate income tax purposes. Although, the Nigerian approach is a departure from the more common approach, where foreign banks are not required to set up a separate legal entity for representative offices, there are important advantages to incorporating a local subsidiary. Firstly, a separate entity can serve as a shield for the foreign parent bank from liabilities associated with its operations in Nigeria. Also, the requirements for local incorporation are minimal and there is no minimum shareholding capital requirement for representative offices in Nigeria. Save for minimal reporting requirements2, there are no comparative prudential obligations placed on representative offices. Additionally, representative offices are not supposed to be income generating and so, despite the corporate tax residency implications of establishing a local subsidiary, there is likely zero income tax exposure for properly structured representative offices

What are some of the business and operating prohibitions for a Representative Office?

The representative office of a foreign bank is prohibited from accepting deposits, lending money or receiving payments for goods and services. A representative office is also prohibited from carrying on other regulated activity and from accepting orders on behalf of a foreign bank

What statutory fees are payable towards the registration of a Representative Office?

The statutory fees payable includes (a) A non-refundable application fee of N5,000,000 (Five Million Naira)and (b) A non-refundable licensing fee N10,000,000 (Ten Million Naira)


It is important for foreign banks looking to establish representative offices in Nigeria to give some consideration to whether or not the representative office will constitute a permanent establishment under Nigerian tax laws. There is no general rule for making a PE determination and as such, each case has to be examined on its facts but in many cases the activities of a representative office will be insufficient to constitute a PE. For instance, Nigerian tax laws express states that a fixed base shall not include facilities used solely for storage or display of goods or merchandise and collection of information. Please see our article:  What is a Permanent Establishment? Do you Have One? on the scope of the permanent establishment rules under Nigerian law


Based on information available from the CBN,a number of international banks of American, French, German, European, Lebanese and English Origin have set up representative offices in Nigeria

For instance, the chief representative of a representative office is required to submit a written confirmation that a representative office has complied with all the requirements in its approval document and this policy document. Also, a representative office is required to submit a certificate from a recognized audit firm confirming that during the year no income was earned or accrued to the Nigerian office not later 28 February  of each year. A representative office is also required to submit a quarterly report which summarizes the activities undertaken by the representative office, including information on credit facilities granted by its parent or its related parties to Nigerian borrowers. Such report should be submitted within 14 days from the end of the quarter. A nil return should be submitted where there are no such activities.

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.