Diagnóstico financiero de la Corporación CFC S.A

No person is permitted to carry out any banking business unless it is a company duly incorporated in Nigeria and holds a valid banking license issued under the Banks and Other Financial Institutions Act (BOFIA).

A banking license is issued by the Central Bank of Nigeria (CBN) and authorises a company duly incorporated in Nigeria to carry out banking business in the country. A banking license can be a commercial banking license, merchant banking license or a specialised banking license, as follows:

 Commercial Banking License – This licenses commercial banking operations on a national, regional or international basis, and authorises banks to (paragraph 3, CBN Scope, Conditions and Minimum Standards for Commercial Bank Regulations No. 01, 2010):

- take deposits and maintain savings and current accounts from natural and legal persons;

- provide retail banking services including mortgage products;

- provide finance and credit facilities;

- deal in foreign exchange and provide foreign exchange services, subject to such a bank having a Foreign Exchange Authorised Dealership License;

- act as a settlement bank, subject to CBN approval;

- provide treasury management services, including but not limited to the provision of money market, fixed income, and foreign exchange investment on behalf of clients, subject to approval of the CBN;

- provide custodial services;

- provide financial advisory services incidental to commercial banking business which do not required regulatory filings with the Securities and Exchange Commission (SEC);

- invest in non-convertible debt instruments and, subject to CBN approval, enter into derivative transactions permitted under CBN circulars and directives;

- undertake fixed income trading, where duly licensed to act as a primary dealer or market maker to trade in securities such as federal government bonds, treasury bills, treasury certificates;

- provide non-interest banking services subject to CBN approval;

- other activities prescribed in writing by the CBN.

2. Merchant Banking License – This license allows financial institutions to provide specialist services such as wholesale banking or investment banking services as set out in the guidelines made under CBN Scope, Conditions and Minimum Standards for Merchant Bank Regulations No. 02, 2010. Activities permitted by a merchant banking license include:

- taking deposits from any natural or legal persons of at least NGN100m per tranche, or such other minimum amount prescribed by CBN;

- providing finance and credit facilities to non-retail customers;

- dealing in foreign exchange and provide foreign exchange services, subject to the requirements of Foreign Exchange (Monitoring & Miscellaneous Provisions, etc.) Act and CBN regulations made under it;

- acting as issuing house, or otherwise managing, arranging or coordinating the issuance of securities, subject to the provisions of BOFIA;

- providing underwriting services for the issuance of securities, subject to the provisions of BOFIA, and to prior notification in writing to the CBN;

- providing treasury management services, including money market, fixed income and foreign exchange investment on behalf of clients;

- providing financial, consulting and advisory services relating corporate and investment matters;

- providing asset management services, including fund and portfolio management services, act as a dealer of securities for its own account, and for clients, or otherwise make or manage investments on behalf of clients;

- engaging in proprietary trading, such as investing in debt instruments, subject to the provisions of BOFIA and CBN rules, and guidelines;

- trading in fixed income securities, where duly licensed;

- providing custodial services;

- issuing, discount and rediscount negotiable instrument;

- providing debt factoring services;

- any other services prescribed in writing by the CBN.

3. Specialised Banking License – this include non-interest banks, microfinance banks, development banks, mortgage banks, and any other banks designated by the CBN.

4. Foreign Exchange Authorised Dealership License – this is issued by the CBN and permits the holder to deal in foreign currency and provide foreign exchange services in the Nigerian foreign exchange market subject to the requirements of Foreign Exchange (Monitoring &

Miscellaneous Provisions, etc.) Act among others, and CBN regulations made under it.

5. Certificate of Registration as a Capital Market Operator – this is issued by the Securities

& Exchange Commission (SEC) and permits the holder to operate in the Nigeria capital market and carry on investment and securities business in Nigeria. However, a bank licensed as a commercial bank cannot be registered as capital market operator, while a merchant bank can be so registered.

a. Application

The process for applying for banking license is in two phases, namely:

 Applying for the grant of approval in principle; and

 Applying for the grant of a final banking license.

b. Grant of approval in principle: An approval for banking license should be addressed to the Director of Banking Supervision Department at the Central Bank of Nigeria (CBN) and submitted with the following:

- Non-refundable application fee of NGN500,000.00;

- Deposit of the applicable minimum share capital with the CBN, with evidence of deposit by each shareholder;

- Feasibility report of the proposed bank including the ownership structure of the proposed investors and percentage of their proposed shareholding, the objectives of the proposed banks, services to be rendered, the branch expansion programme and a five-year financial projection;

- List of shareholders, proposed directors and principal officers of the proposed bank and their particulars;

- Shareholders agreement (where applicable);

- Any other document/information that may be demanded by the authority.

c. Grant of final license: Not later than six months after the grant of approval in principle, the promoters of a proposed bank must submit application for the grant of final banking license addressed to the Director of Banking Supervision Department at the Central Bank of Nigeria (CBN) and submitted with the following:

- Non-refundable fee of NGN5,000,000.00 in bank draft payable to CBN;

- Three copies each of:

o Certified copy of the certificate of incorporation of the bank;

o Certified copy of the memorandum of association;

o Certified copy of Form CO2 (allotment of shares) and CO7 (particulars of directors)

- Evidence of location of head office of branch building (rented or owned) for the take-off of the banking business;

- Changes, if any, of the board, management and shareholding must be clearly stated for necessary appraisal;

- Evidence of strong room, loading bay, and banking hall facilities;

- Bullion lorries with necessary security equipment;

- Evidence of IT facilities/computerisation;

- Copies of offers of letters and acceptance of employment in respect of the management team.

d. Requirements

Minimum paid-up capital requirement, the minimum paid-up capital requirements for the different categories of banks are as follows:

- Regional commercial banking license: NGN10 billion or other prescribed amount.

- National commercial banking license: NGN25 billion or other prescribed amount.

- International commercial banking license: NGN50 billion or other prescribed amount.

- Merchant banking license: NGN15 billion or other prescribed amount.

For an applicant meeting all the requirements, the Governor of the CBN may issue the license with or without conditions, or refuse to issue a license, and does not need to give any reason for his refusal. An applicant must submit all documents for both stages of approval as prescribed above.

e. Foreign Applicants

A foreign applicant must incorporate a company in Nigeria, apply for a business permit, register with the Nigerian Investment Promotion Commission (NIPC) and obtain a banking license.

f. Timing and basis of Decision

The BOFIA is silent on the timelines for the grant of a banking license. The CBN makes its decision based on the information provided by the applicants and based on its independent examination of applicant. An applicant for a banking license must provide evidence that it meets all the requirements for the grant of a license. As stated, the CBN can refuse to issue a license and need not give any reasons for its refusal.

g. Cost and Duration

The applicant pays a non-refundable fee of NGN500,000.00 for an approval in principle and a non-refundable licensing fee of NGN5,000,000.00 at the final approval stage.

There are no renewal fees charged by the CBN for licenses except for the foreign exchange authorised dealership license which is subject to an annual renewal fee. A banking license is not issued subject to any time limits, but the CBN may suspend or revoke the license if it is satisfied that the bank:

- ceases to carry on the type of banking business for which the license was issued for any continuous or aggregate period of six months during a continuous period of 12 months;

- goes into liquidation or is wound up or otherwise dissolved;

- fails to fulfill or comply with any condition subject to which the license was granted;

- has insufficient assets to meet its liabilities;

- fails to comply with any obligations imposed on it by or under the Banks and Other Financial Institutions Act (BOFIA) or the Central Bank of Nigeria (Establishment) Act, 2007 (CBN Act);

- fails to comply with the minimum capital requirements by the CBN.

Nigeria does not have a framework similar to the passporting rights to financial or credit institutions operating within the European Union. A foreign bank cannot carry out banking services in Nigeria unless it has incorporated a local entity and obtained a valid banking license.

There are no exemptions from licensing requirements available to foreign banks who wish to carry on banking business in Nigeria. However, foreign banks may open a representative offices in Nigeria subject to obtaining the prior approval of the Central Bank of Nigeria (CBN) provided that such representative offices will not be licensed to carry out banking activities in Nigeria and will only be permitted to act as liaison offices for the customers of the foreign bank and to carry out research activities.

3.4 Forms of Banks