July 2 (THEWILL) — The Central Bank of Nigeria (CBN) has capped the suspension of certain contractual obligations involving troubled banks at two business days. The guidance takes immediate effect.
The clarification is contained in an interpretative guidance issued by the Acting Director of the Financial Markets Department, Okey Umeano, which took immediate effect.
According to the CBN, the absence of a clearly defined maximum period for exercising its powers under Sections 34(2)(b) and 40(2) of the Banks and Other Financial Institutions Act (BOFIA), 2020, had created uncertainty for banks, financial institutions and counterparties to financial contracts.
The apex bank said the uncertainty risked undermining effective commercial risk management, prompting the issuance of operational guidance on how the Governor will exercise the relevant statutory powers.
The guidance applies to banks, other financial institutions and counterparties to what the CBN described as “Affected Contracts”—financial contracts that fall within the scope of the relevant BOFIA provisions.
Under the new framework, any suspension of payment or delivery obligations under Section 34(2)(b), or the temporary suspension of contractual termination rights under Section 40(2), must not exceed two business days from the date the CBN Governor issues a written order or notice.
Section 34(2)(b) empowers the CBN to facilitate the acquisition of a failing bank to preserve financial stability, while Section 40(2) allows the Governor to suspend certain contractual termination rights after revoking a banking licence where it is in the public interest.
The circular comes days after the CBN revoked the licences of 46 inactive, insolvent and non-operational microfinance banks. Although the guidance is not tied to any specific institution, it clarifies how contractual obligations will be treated whenever the apex bank invokes its statutory resolution powers.
The directive was issued under Section 56 of BOFIA and Section 33(1)(b) of the CBN Act, 2007, and became effective on July 1.
Ogochukwu Onwaeze is a writer specializing in business and economic journalism. At THEWILL News Media, she translates market trends, financial developments, and policy shifts into clear and engaging stories.
