The Central Bank of Nigeria (CBN) has announced plans to tighten its regulatory oversight of banks' investments in offshore subsidiaries and ventures. According to Dr. Olubukola Akinwunmi, Director of the CBN's Banking Supervision Department, the move aims to prevent excessive exposure to foreign operations that could threaten the stability of Nigerian lenders. The CBN will enforce its existing rule limiting banks' investments in offshore subsidiaries to 10% of shareholders' funds.
The decision was made at the 38th Seminar for Finance Correspondents and Business Editors in Abuja, where Akinwunmi emphasized the importance of prudent investment decisions and effective risk management. He warned that reckless investments in offshore subsidiaries could negatively impact Nigerian banks and erode confidence in the banking system. The CBN's move comes amid increased international expansion by Nigerian banking groups, with several establishing or acquiring subsidiaries across African markets and other jurisdictions.
The regulatory framework already in place limits investments in foreign banking subsidiaries to 10% of shareholders' funds, aiming to contain concentration and cross-border risks. However, the CBN's new approach will ensure that stronger capital positions arising from the recently completed recapitalisation exercise do not automatically translate into unlimited expansion of banks' offshore operations. This development may have implications for banks whose international operations have expanded rapidly in recent years.
Access Holdings, for instance, has disclosed plans to reduce equity stakes in some foreign subsidiaries to comply with the CBN requirement, giving itself 12 months to bring its foreign investments within the regulatory limit. The issue is significant, as the CBN seeks to strengthen the resilience of Nigerian banking groups following the recapitalisation programme, under which 33 banks raised a combined N4.65 trillion to meet revised minimum capital requirements.
Akinwunmi emphasized that stronger capital must be accompanied by disciplined investment decisions and effective risk management. He warned that excessive exposure to offshore subsidiaries could transmit risks from foreign operations to Nigerian parent institutions, potentially weakening the capital buffers the recapitalisation aimed to strengthen. The CBN's approach is part of its broader effort to strengthen supervision of financial groups and holding-company structures.
The CBN's scrutiny will extend beyond capital adequacy to governance, asset quality, liquidity, and risk exposures. Akinwunmi noted that poor governance, weak risk management, and imprudent investment decisions could erode banks' capital, regardless of the amount raised during recapitalisation. Deputy Governor, Corporate Services, CBN, Dr. Muhammad Sani Abdullahi, reinforced this position, stating that capital was only the starting point for building a resilient banking system.
Abdullahi emphasized that banks must combine stronger capital buffers with sound governance, effective internal controls, and comprehensive risk-management systems covering credit, market, liquidity, and operational risks. The renewed focus on offshore investments forms part of the CBN's broader post-recapitalisation supervisory strategy to ensure that banks deploy additional capital prudently without creating new vulnerabilities.
Key points
- The CBN will enforce its existing rule limiting banks' investments in offshore subsidiaries to 10% of shareholders' funds.
- The regulatory move aims to prevent excessive exposure to foreign operations that could threaten the stability of Nigerian lenders.
- The CBN's approach forms part of its broader effort to strengthen supervision of financial groups and holding-company structures.
