The Central Bank of Nigeria has issued fresh interpretative guidance clarifying the application of Sections 34(2)(b) and 40(2) of the Banks and Other Financial Institutions Act, 2020, setting a maximum period of two business days for the suspension of certain contractual obligations during the resolution of failing banks and other financial institutions.
The clarification was contained in a circular issued on Wednesday by the Acting Director of the Financial Markets Department, Okey Umeano.
The apex bank said the guidance takes immediate effect from July 1, 2026.
According to the CBN, the absence of a clearly defined maximum duration for the exercise of its powers under the relevant BOFIA provisions had created uncertainty for banks, other financial institutions and counterparties to financial contracts.
The circular stated that the uncertainty had the potential to affect the effective management of commercial risk.
“The Central Bank of Nigeria has observed that the absence of a defined maximum duration period pursuant to the exercise of its powers under Sections 34(2)(b) and 40(2) of the Banks and Other Financial Institutions Act, 2020 has created some uncertainty for counterparties dealing with Nigerian banks and other financial institutions in respect of financial contracts,” the circular stated.
To address the concern, the CBN said the circular provides interpretative and operational guidance on how it will exercise the powers conferred on the Governor of the Central Bank under the relevant provisions of BOFIA.
The guidance applies to banks, other financial institutions and counterparties to what the CBN described as “Affected Contracts.”
According to the apex bank, an affected contract is any contract to which a bank or other financial institution is a party and which falls within the scope of Sections 34(2)(b) or 40(2) of BOFIA.
Under the new guidance, any suspension of payment or delivery obligations under an affected contract involving a failing bank, pursuant to Section 34(2)(b), shall not exceed two business days.
Similarly, any suspension of termination rights under contracts covered by Section 40(2) shall also not exceed two business days.
The two-business-day period will begin from the date on which the written order or notice of suspension is issued by the CBN Governor.
Section 34(2)(b) of BOFIA empowers the CBN to facilitate the acquisition of a failing bank by one or more banks as part of regulatory measures aimed at preserving financial stability.
Section 40(2) allows the CBN Governor, where a banking licence has been revoked and it is considered to be in the public interest, to direct resolution actions, including temporary suspension of certain contractual termination rights.
By introducing the two-business-day limit, the CBN has clarified that any suspension arising from the exercise of these statutory powers will be temporary and time-bound.
The measure is expected to provide greater certainty for market participants, banks, financial institutions and counterparties dealing with Nigerian financial institutions.
The circular also gives parties to financial contracts clearer guidance on how their payment obligations, delivery obligations and termination rights may be affected where the CBN intervenes in a failing bank or troubled financial institution.
The guidance comes as the CBN continues to strengthen its bank resolution framework and regulatory oversight of the financial services sector.
It also follows the apex bank’s recent revocation of licences of 46 microfinance banks over regulatory breaches, although the latest circular is not tied to any specific institution.
The CBN said the guidance was issued pursuant to the powers granted to the Governor under Section 56 of BOFIA and Section 33(1)(b) of the Central Bank of Nigeria Act, 2007.