Experts Explain What to Expect Over New CBN Directive for Bank Directors to Resign
- Industry watchers are worried that the Central Bank of Nigeria's order to banks on insider loans could result in some financial report fraud
- They claimed that the regulator's warning would likely allow the banks to shift funds and conceal their operations
- Any failure to fulfil the CBN deadlines will be considered a rule breach and may lead to additional sanctions
Legit.ng journalist Zainab Iwayemi has 5-year-experience covering the Economy, Technology, and Capital Market.
Concerns have been expressed by industry observers that the Central Bank of Nigeria's directive to banks about insider loans may lead to some financial report falsification.
Source: UGC
These stakeholders told The PUNCH that the warning from the regulator would probably enable the banks to transfer money and hide their activities.
Given the rise in Non-Performing Loans (NPL), Legit.ng earlier reported that the Central Bank of Nigeria (CBN) ordered bank directors connected to non-performing loans to step down immediately.
This is also part of the bank’s moves to strengthen risk management and corporate governance within the banks and protect shareholders' funds.
Banks were directed to make sure that all deadlines for insider-related loans that have been approved by the CBN are strictly adhered to.
Any inability to meet the deadlines will be regarded as a violation of the regulations and could result in further penalties.
How experts react
Rotimi Fakayejo, an economic and financial specialist, pointed out that book juggling was a possibility even though there might be compliance with some directors stepping down.
He said:
“We know full well that most bank failures have more to do with insider-related credit. With this happening, the CBN is definitely on the right path. Even inside the CBN, we do hear that this CBN regime is not taking it easy at all. The regulation now is stricter. The banks know; those in the financial services sector regulated by the CBN know. It is good for the health of the economy and for people to be able to have more confidence in the system.”
More options for CBN
According to Fakayejo, acquiring the impacted directors' shares could be simpler than selling off other assets, and they can be quickly acquired without creating a glut.
“Concerning the shares, I don’t think it is going to create any glut in the market. There will be people willing to take up the interest of the affected directors. So, it won’t affect the liquidity in the shares of the bank,” he affirmed.
An insider at a tier-1 bank who spoke on the condition of anonymity said,
“Most of them are very smart; they are the owners of the books; they are the owners of the software. With this information, they can quickly do some things. CBN under Cardoso wants to face commercial banks. They come to our branches every day on cash availability, ATMs, and so many issues.”
The source added that this directive requires quick action on the part of the CBN.
Source: Getty Images
He said,
“They borrow money at 11, 12 per cent and invest it at 22 per cent and every month, they enjoy the 10 per cent differential. It is for the CBN to act.”
CBN says 95% of bank debtors took loans from microfinance banks in 2024
Legit.ng reported that according to recent data released by the Central Bank of Nigeria (CBN), microfinance banks accounted for 95.66% of bank loans in 2024.
The information, which includes loan transactions from September 2024, demonstrates how important microfinance institutions are to both small enterprises and individuals.
According to the PUNCH, microfinance banks aggregated an amazing 6,253 borrowers from a total of 6,537 debtors across all credit classes.
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Source: Legit.ng
