The Central Bank of Nigeria (CBN) is tightening rules on banks’ investments in offshore subsidiaries and ventures, limiting them to 10 per cent of shareholders’ funds, and warning that excessive exposure to foreign operations could threaten the stability of Nigerian lenders.
Director, Banking Supervision Department, CBN, Dr Olubukola Akinwunmi, disclosed at the 38th Seminar for Finance Correspondents and Business Editors on Tuesday in Abuja.
“We cannot afford to have reckless investments in offshore subsidiaries that could negatively impact our banks. The Central Bank is enforcing the rules and laws more strictly to ensure continued confidence in the banking system,” he said.
The development comes amid increased international expansion by Nigerian banking groups, several of which have established or acquired subsidiaries across African markets and other jurisdictions.
The CBN’s position means that stronger capital positions arising from the recently completed recapitalisation will not automatically translate into unlimited expansion of banks’ offshore operations.
Under the regulatory framework, investments in foreign banking subsidiaries are subject to a 10 per cent ceiling relative to shareholders’ funds. The rule is intended to limit the amount of capital Nigerian banks can commit to overseas operations and contain concentration and cross-border risks.
