An Investor Now Requires CBN’s Prior Approval and a No Objection to Acquire 5% Equity Holding of a Bank/Holdco

Based on the new Central Bank of Nigeria (CBN) Corporate Governance Guidelines recently issued by the bank regulator, potential investor will now require prior approval and no objection from the CBN before any acquisition of shares of a bank, including through the capital market, that would result in equity holding of five per cent (5%) and above. This is contained in Section 20 of the CBN Corporate Governance Guidelines which dwells on the ‘Treatment of Shareholders’ and where the CBN has an objection on any acquisition as stated in Section 20.2.b of the guideline, notice of the objection shall be communicated to the bank, and the bank shall notify such investor(s) within forty-eight (48) hours.

Furthermore, the new guidelines also stated that ‘Except where prior approval of the CBN is granted, no individual, group of individuals, their proxies or corporate entities shall own controlling interest in more than one bank’

Below is an excerpt of Section 20 of the CBN Corporate Governance Guidelines as it affects bank shareholders

20.0 Treatment of Shareholders 

20.1 Shareholders Engagement 

a. The Board of a bank with institutional investors shall ensure that such investors carry out the responsibilities detailed in Recommended Practice 22.3 of NCCG 2018. 

b. The Board shall ensure that dealings of publicly listed banks with shareholders’ associations are in strict adherence with the Code of Conduct for Shareholders’ Associations issued by the Securities and Exchange Commission (SEC). 

c. Where a bank is not publicly quoted, its dealings with shareholders shall be transparent and in line with best practices. 

20.2 Protection of Shareholders Rights 

a. Except where prior approval of the CBN is granted, no individual, group of individuals, their proxies or corporate entities shall own controlling interest in more than one bank. 

b. CBN’s prior approval and No Objection shall be sought and obtained before any acquisition of shares of a bank (including through the capital market), that would result in equity holding of five per cent (5%) and above, by any investor. 

c. Where the CBN has an objection on any acquisition as stated in Section 20.2.b above, notice of the objection shall be communicated to the bank, and the bank shall notify such investor(s) within forty-eight (48) hours. 

d. Government’s direct and indirect equity holding in a bank shall not be more than ten per cent (10%), which shall be divested to private investors within a maximum period of five years from the date of investment. 

For existing investments above five years, the bank shall within two years from the effective date of this Guidelines, comply with the provision.

The effective date of these Guidelines is August 1, 2023