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CENTRAL BANK OF NIGERIA
SETS NEW HURDLES FOR FOREIGN
BANKS DESIROUS OF ACQUIRING
NIGERIAN BANKS
December 2008 Vol. 21: Issue 12
In a recent regulation issued by the
Central Bank of Nigeria (CBN), fresh
hurdles have been set for foreign banks
desirous of merging with or acquiring
any of the existing local banks in the
country.
Under the new regulation approved
by the CBN, if a group of foreign
institutions decides to invest in any of
the local banks, the aggregate
investment must not be more than 10
per cent of the latter’s total capital.
Further, in a situation where a single
foreign investor invests in a local bank,
such investment may not exceed the
holding of the largest Nigerian
shareholder.
In addition, any foreign-owned bank
in Nigeria desirous of acquiring or
merging with a local bank must have
operated in Nigeria for a minimum of
five years. To qualify for merger or
acquisition of any of Nigeria’s local
banks, the foreign bank must have
achieved a spread of two-thirds of the
states of the federation. This provision
mandates that the foreign-owned bank
must have branches in at least 24 out of
the 36 states of the federation of Nigeria.
©Blackfriars LLP 2008. All rights reserved. This document is for general guidance only. Definitive advice
should be sought from counsel if required. Blackfriars LLP is a Nigerian law firm with a representative
office in Toronto, Canada.
The new regulations are limited to the
top ten banks in Nigeria. The top ten
banks in Nigeria control nearly seventy
percent (70%) of the banking sector.
It seems that these new regulations
are designed to ensure that the growing
foreign interests in the Nigerian banking
sector do not translate into a foreign
takeover of the top ten existing local
banks.
However, the restriction does not
debar foreign banks from setting up
businesses in Nigeria on their own if
they satisfy the N25 billion capital base
requirement and other statutory
prescriptions.
For foreign banks interested in doing
business in Nigeria, the restriction is
limited only to the top ten banks in the
country. Other existing local banks are
excluded from this new policy. Foreign
banks may therefore merge with or
acquire local banks outside the top-ten
list. The new regulations permit foreign
banks to acquire or merge with existing
banks which already have structures
and branches in place.
It would appear that the regulations are
primarily aimed at avoiding a situation
in which foreign banks dominate
Nigeria’s financial system and prescribe
rules on Nigeria’s economic
development.
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The CBN has gone to great lengths to

justify these new restrictions. The bank
has stressed that it is not preventing
foreign banks from investing in the
economy. Rather, it seeks to avoid the
acquisition of the top ten banks by
foreign banks.

However, with the recent meltdown in

global financial markets, questions
could be asked whether the CBN
regulations are in tandem with current
global realities.

For further information, please contact:

Ms. Nkeiru Onyeaso

Tel: +234 808 718 0833
Email: Nkay@blackfriars-law.com
Fax: +234 1 2694781

Ms. Clara Ndive

Email: Clara@blackfriars-law.com
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©Blackfriars LLP 2008. All rights reserved. This document is for general guidance only. Definitive advice
should be sought from counsel if required. Blackfriars LLP is a Nigerian law firm with a representative
office in Toronto, Canada.