THE Central Bank of Nigeria (CBN) says some bank owners, shareholders and directors have left the banking industry following tougher enforcement of rules governing loans to bank insiders, warning that further board exits could follow if abuses continue.
CBN’s Director of Banking Supervision, Olubukola Akinnwunmi, disclosed this at the 38th Seminar for Finance Correspondents and Business Editors in Abuja. He did not name the individuals or financial institutions affected.
Akinnwunmi said the regulator was enforcing insider credit rules more strictly, making it difficult for directors to retain their positions when lending to connected parties breaches prudential requirements.
He said the CBN had made it clear to banks that persistent insider lending violations could lead to the removal or departure of directors, stressing that sound corporate governance was essential to maintaining confidence and stability in the banking sector.
The regulator’s position reflects a tougher approach to loans granted to directors, senior executives, major shareholders and companies linked to them. Such facilities can create conflicts of interest and weaken lending standards when they are not properly controlled.
“The bank, under the leadership of Governor Olayemi Cardoso, has made it clear to the banking system that we will follow the rules to the letter,” Akinnwunmi said, adding that the objective was to strengthen the resilience of financial institutions.
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CBN tightens rules on insider loans
The enforcement follows a February 2025 CBN circular directing banks to address insider-related credit facilities that exceed statutory limits.
Under the directive, banks were given 180 days to regularise facilities that breached the limits established by the Banks and Other Financial Institutions Act (BOFIA) 2020. They were also required to submit periodic reports on their insider lending exposures and measures taken to comply.
The circular further addressed directors with non-performing insider-related loans, requiring them to resign immediately in line with the regulator’s directive.
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The rules are intended to prevent bank insiders from using their positions to secure excessive or poorly assessed loans, potentially exposing depositors and shareholders to losses.
Akinnwunmi said enforcement of insider credit rules, large exposures and single-obligor limits had intensified under the current regulatory framework. His remarks suggest the CBN is moving beyond issuing directives to demanding concrete compliance, including changes in board membership where necessary.
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Insider lending could attract higher capital requirements
The CBN director also warned that raising capital alone would not protect banks from distress if governance failures and excessive risk-taking remained unresolved.
He identified weak board oversight, poor credit decisions, ineffective internal controls and insider abuses among the factors that can undermine financial institutions, even when they meet minimum capital requirements.
Akinnwunmi said the CBN’s risk-based capital framework would require banks to hold capital in line with the risks they assume, including risks associated with insider credit.
This means banks with greater risk exposures could face higher capital requirements, increasing the cost of lending practices that expose them to losses.
“It’s not just about maintaining a minimum capital requirement. It’s about maintaining a capital requirement that speaks to the level of risk exposure or risk-taking that a bank has decided to embark on based on its business model,” he said.
The warning comes as Nigerian banks adjust to higher capital requirements and increased regulatory scrutiny following the industry’s recapitalisation exercise.
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For bank shareholders, stricter insider lending rules could have consequences beyond financial penalties, including the loss of board positions and additional capital pressure. Directors and major investors may also face closer scrutiny over loans extended to businesses they own or control.
The CBN’s message is that stronger capital buffers must be matched by responsible lending, effective oversight and compliance with prudential rules to prevent a recurrence of banking sector distress.
