The Central Bank of Nigeria (CBN) has issued a new regulatory guidance limiting the suspension of payment obligations and contractual termination rights involving banks and other financial institutions under regulatory intervention to a maximum of two- business -day.
The move according to the apex bank is aimed at boosting market confidence and reducing uncertainty in the financial system.
In a circular addressed to all banks and other financial institutions on Wednesday, the apex bank said the clarification became necessary following concerns that the absence of a defined maximum duration for the exercise of its powers under the Banks and Other Financial Institutions Act (BOFIA), 2020, had created uncertainty for counterparties engaged in financial contracts with Nigerian banks.
According to the CBN, the uncertainty have the potential to impede effective commercial risk management and weaken confidence among domestic and international market participants.
The circular, signed by the Acting Director of the Financial Markets Department, Okey Umeano, provides interpretative guidance on the practical application of Sections 34(2)(b) and 40(2) of BOFIA.
