UNIVERSITY OF BENIN, BENIN CITY.

FACULTY OF MANAGEMENT SCIENCE

DEPARTMENT OF BANKING AND FINANCE

ASSIGNMENT ON:
THE PROVISIONS OF BOFIA FOR THE REGULATIONS AND SUPERVISION
OF BANKS AND OTHER FINANCIAL INSTITUTIONS IN NIGERIA.

MSc FINANCE
2021/2022 SESSION

REG NO:

COURSE CODE: FIN 815

COURSE TITLE: REGULATION OF FINANCIAL INSTITUTION

BY: AGHA-AIGUOKHIAN SACHEAL OGBE

SUBMITTED TO: DR. J. OBAYAGBONA

2ND MAY, 2023.

BANKS AND OTHER FINANACIAL INSTITUTION ACT, 2020

ACT No 5

AN ACT TO REPEAL THE BANKS AND OTHER FINANCIAL INSTITUTIONS ACT, CAP, B3, LAWS OF THE
FEDERATION OF NIGERIA, 2004 AND ENACT THE BANKS AND OTHER FINANCIAL INSTITUTION ACT, 2020
TO, AMONG OTHER THINGS, REGULATE AND SUPERVISE BANKING AND BUSINESS OF OTHER FINANCIAL
INSTITUTIONS IN NIGERIA; AND FOR RELATED MATTERS.

[12TH DAY OF NOVEMBER, 2020]

ENACTED by the National Assembly of the Federal Republic of Nigeria-

CHAPTER A – BANKS

Part 1 – LICENSING AND OPERATION OF BANKS

1. -(1) The Central Bank of Nigeria (in this Act referred to as “the Bank” shall have all the functions
and powers conferred and duties imposed on it by this Act.
(2) The bank may authorize or instruct any officer or employee of the bank to perform any of its
functions, exercise any of its powers or discharge ay of its duties under this Act.
(3) The bank may, either generally or in any particular case, appoint any person who is not an
officer or employee of the Bank to render such assistance as it may specify in the exercise of its
powers, the performance of its functions or the discharge of its duties under this Act, or the
Central Bank of Nigeria Act, or to exercise , perform or discharge the functions and duties on
behalf of, and in the name of, the Bank.

2. – (1) No person shall carry on any banking business in Nigeria except it’s a company duly
incorporated in Nigeria and holds a valid banking license issued under this Act.

(2) Any person who carries on banking business in Nigeria without a valid license under this Act,
commits an offence and is liable on conviction to –
(a) imprisonment for a term of not less than five years;
(b) a fine of not less than of N50,000,000;
(c) two times the cumulative deposits or other amount collected; or
(d) both imprisonment and fine.
(3) For the purpose of subsection (2), “any person” includes a body corporate, its promoters,
directors, managers, or officers that are in any way connected with superintending, directing or
managing the affairs of the company.
(4) For the purpose of refunding the deposits to account holders in subsection (2), the Bank may
direct that the money be deposited with a licensed bank appointed for the purpose who shall
undertake the refund and report thereon to the Bank.
(5) For the purpose of this Act, a person is deemed to be receiving money as deposits and thus,
conducting banking business if the person –
(a) accepts deposits from the general public as a feature of its business or if the person
solicits for deposits orally, electronically or through any form of advertisement or
otherwise by any other means; or
 (b) receives money as deposits which is limited to fixed amounts, or for which
certificates or other instruments are issued in respect of such amounts providing for the
repayment to the holder, either conditionally or unconditionally of the amount of the deposits
at specified or unspecified dates, or for the payment of interest, dividend, profit or fees on the
amounts deposited
At specified intervals or otherwise, or that such certificates are transferable:

Provided that the receiving of money against any issue of shares, debentures or non-interest-
bearing instruments offered to the public in accordance with any enactment in force within the
federation is not deemed to constitute receiving money as deposits for the purpose of this Act.
3. – (1) Any person desiring to undertake banking business in Nigeria shall apply in writing to the
Governor for the grant of a license and shall accompany the application with-
(a) A feasibility report for the proposed bank, including financial projections for at least five
years;
(b) A draft copy of the memorandum and articles of association of the proposed bank;
(c) A list of the shareholders, directors and principal officers of the proposed bank and their
particulars;
(d) Where the application is in relation to non-interest banking, a list of experts on non-interest
banking, a list of experts on non-interest banking or finance that will serve as its advisory
committee of experts;
(e) The prescribed application fee; and
(f) Such other information, documents and reports as the Bank may specify.
(2) After the applicant company has provided all such information, documents and reports
as the Bank may require under subsection (1), the shareholders of the proposed bank shall
deposit with the bank a sum equal to the minimum paid-up share capital that may be
applicable under section 9 of this Act.

(3) upon the payment of the sum referred to under subsection (2),the Governor may, with
the approval of the Board, issue a license with or without conditions or refuse to issue a
licence, and the Governor need not give any reason for such refusal.

(4) Where a licence is granted, the Bank shall duly notify the applicant and upon being
notified, the applicant shall pay the prescribed licence fee within the time stipulated by the
Bank.

(5) Any foreign bank or other entity which does not have a physical presence in its country
of incorporation, or which is not licensed in its country of incorporation and which is not
affiliated to any financial services group that is subject to effective consolidated supervision,
shall not be permitted to operate in Nigeria, and no Nigerian bank shall establish or continue
any relationship with such bank or other entity.

(6) Any bank that contravenes subsection (5) is liable to a penalty of not less than
N20,000,000 and to an additional penalty of N500,000 for each day the contravention
continues.
CHAPTER B-SPECIALISED BANKS AND OTHER FINANCIAL INSTITUTIONS

PART VII-ESTABLISHMENT OF SPECIALISED BANKS AND OTHER FINANCIAL INSTITUTIONS

Prohibition of unlicensed financial institutions Cap.117. LFN 2004 Act No. 4. 2014. Act No. 29. 2007.

57.-(1) Without prejudice to the provisions of Chapter A of this Act, no person shall carry on specialized
banking or business of other financial institution in Nigeria other than insurance, pension fund
management, collective investment schemes and capital market business as defined respectively in the
Insurance Act, the Pension Reform Act and the Investment and Securities Act except it is a company duly
incorporated in Nigeria and holds a valid licence granted under this Act.

(2) In this section, “business of other financial institutions" include-

(a) business of a discount house;

(b) bureau de change;

(c) credit bureau;

(d)finance company or money brokerage;

(e) international money transfer services;

(f) mortgage refinance company;

(g) mortgage guarantee company;

(h) credit guarantee;

(i) financial holding company or payment service providers; and

(j)businesses whose objects include-

(i)factoring,

(ii)project financing,

(iii)equipment leasing,

(iv)debt administration,

(v) private ledger services,

(vi) investment management,

(vii) local purchases order financing,

(viii) export finance, and

(ix)such other business as the Bank may, from time to time, designate, regardless of whether
such businesses are conducted digitally, virtually or electronically only.
 (3) Any person or institution which, before the commencement of this Act, was carrying on any
business of other financial institution shall apply inwriting to the Bank for a licence within three
months of the date of commencement of this Act.

A 702 2020 No.5 Banks and Other Financial Institutions Act,2020

(4) Any person who fails to apply as provided in subsection (3) or whoso applies and is not
granted a licence within three months of such application shall cease to carry on such business
of other financial institutions.

(5) Any person who conducts or is involved in conducting the business of other financial
institutions without a valid licence in contravention of subsection (1) or (4), commits an offence
and is liable on conviction-

(a) in the case of a body corporate, to a fine of not less than N10,000,000and an additional fine
of not less than N200.000 for each day during which the offence continues; and

(b) in any other case-

(i) to imprisonment for a term of not less than five years.

(ii)a fine of not less than N2,000,000 and an additional fine of not less than N50,000 for
each day during which the contravention continues, or

(iii) both such imprisonment and fine.

Application for licence.

58.-(1) Any person wishing to carry on the business of other financial business other than insurance and
stock broking and pension fund management in Nigeria shall apply in writing to the Bank for the grant of
a licence and shall accompany the application with-

(a) a feasibility report for the proposed financial business, including the financial projections for
not less than five years:

(b) a draft copy of the memorandum and articles of association of the proposed financial
business:

(c) such other information, documents and reports as the Bank may, from time to time, specify;
and

(d) the prescribed non-refundable application fee.

(2) After the applicant has provided all such information, documents and reports as the Bank may
require under subsection (1), the Bank may grant the licence with or without conditions or refuse to
grant the licence.

(3) Where a licence is granted, the Bank shall give written notice of that fact to the applicant and the
licence fee shall be paid.

(4) The Bank may vary or revoke any condition subject to which a licence was granted or may
impose fresh or additional conditions to the grant of a licence.
 (5) Any person who transacts a business without a valid licence under this section, whether in the
case of an individual or a body corporate, commits an offence and is liable on conviction to-

Banks and Other Financial Institutions Act, 2020 No.5 A 703

(a) imprisonment for a term of not less than three years;

(b) a fine of not less than | 10,000.000 two times the cumulative amount collected; or

(c) both such imprisonment or fine.

Failure to comply with conditions of licence. etc.

59.-(1) Any person who fails to comply with any of the conditions of a licence granted under section 58
is liable to a penalty of not less thanN2,000,000 and an additional fine of not less than N50,000 for each
day during which the contravention continues.

(2) Every person carrying on any financial business referred to in section57 of this Act shall-

(a) comply with the monetary policy directives and other guidelines as the Bank may, from time
to time, issue; and

(b) furnish, within the stipulated time, any statistical and other returns as the Bank may, from
time to time, require.

(3) Any person who fails to comply with the provisions of subsection (2) is liable to a fine of not less
than | 2.000,000 and an additional penalty of not less than N50,000 for each day during which the
offence continues.

(4) Any person who, being a director, manager or officer of a specialised bank or other financial
institution, fails to take reasonable steps to secure compliance with any of the conditions of the
licence of the bank, commits an offence and is liable on conviction to-

(a) imprisonment for a term of not less than three years;

(b) a fine of not less than N2,000,000 and an additional penalty of N50,000for each day during
which the offence continues: or

(c) both such imprisonment and fine.

(5) Failure to comply with the guidelines or other directives of the Bank or refusal to supply returns
in the prescribed form may be a ground for the revocation of a licence granted under this Act.

Supervisory power of the Bank over other financial institutions and specialised banks.

60.-(1) Without prejudice to the provisions of sections 31 and 32 of this Act the Bank shall-

(a) supervise and regulate the activities of other financial institutions and specialised banks;

(b) prescribe the minimum paid-up share capital requirement of other financial institutions and
specialised banks: and
 (c) appoint examiners or any other person to carry out regular or routine examination of the
books and affairs of specialised banks and other financial institutions.

A 704 2020 No.5Banks and Other Financial Institutions Act, 2020

(2) The Bank may appoint examiners and other person to carry out regular or routine
examination of the books and affairs of other financial institutions and specialised banks.

(3)Where the Governor is satisfied that it is in the public interest to do so, such person may, in
addition to the routine or regular examination, order a special examination or investigation of
the books and affairs of any other financial institution or specialised bank and, for that purpose,
the Governor shall appoint one or more qualified persons other than the officers of the Bank to
conduct special examination or investigation under conditions of confidentiality of the books
and affairs of such other financial institution or specialised bank.

(4) The cost and expenses of the Bank or remuneration of the person so appointed, as the case
may be, shall be payable from the fund and property of the other financial institution or
specialised bank.

(5) For the purpose of implementation of this section, other financial institutions and specialised
banks shall be treated in the same manner as banks with respect to the requirements of section
23 of this Act.

Application of Chapter A of this Act to specialised banks and other financial institutions.

61.-(1) Without prejudice to the provisions of this Part, the provisions of Chapter A of this Act, including
all its offences, penalties and the powers of the Bank shall apply with such necessary modifications to
specialised banks and other financial institutions.

(2) No person or authority other than the Bank shall, as from the coming into effect of this section,
exercise any regulatory or supervisory authority over specialised banks and other financial
institutions.

(3) The Governor shall appoint such expert or experts on non-interest banking or to constitute a
panel of such experts to advise the Bank on matters of non-interest banking, as the Governor may
determine.

(4) The cost and expenses of the Bank or the remuneration of the person so appointed pursuant to
subsection (3) shall be payable from the fund and property of the specialised bank or other financial
institution concerned.
Management and control of failing specialised banks and other financial institutions.

62.-(1) Where the Bank is satisfied that a specialised bank or other financial institution is in a grave
situation, the Governor may by order in writing exercise any one or more of the powers specified in
section 34 of this Act.

(2) The Bank may grant advances to non-interest banks in a grave situation or which the Bank
otherwise determines requires liquidity support on such terms other than as to interest as the Bank
may deem fit.

Banks and Other Financial Institutions Act,2020 No.5 A 705

(3) If after taking any of the steps stipulated in subsection (1) or such other measures as in the
opinion of the Bank may be appropriate in the circumstance, the state of affairs of the specialised
bank or other financial institution concerned does not improve, the Bank shall revoke the licence of
such specialised bank or other financial institution.

(4) Any specialised bank or other financial institution whose licence is revoked under subsection (1)
shall be wound up by the Corporation or a person appointed by the Bank.

REFERENCE TO THE NEWS OF THE NEW AMENDMENT AS AT NOVEMBER 13, 2020.

In a bid to strengthen the regulatory and supervisory framework of the Central Bank
of Nigeria (CBN) in its functions within the Financial industry, the Banks and Other
Financial Institutions (BOFI) Act 2020 has been assented to by President
Muhammadu Buhari. The President made this disclosure through a statement
released on his official twitter account on November 13, 2020, in which he noted the
BOFI Act 2020 is a historic and significant achievement that will enhance the
soundness and resilience of Nigeria's financial system. The Act which repeals the
extant BOFI Act 1991 (as amended in 1997, 1998, 1999, 2002) introduces and
amends major provisions that govern the activities of Deposit Money Banks (DMBs),
specialized banks and other financial institutions. The legislation enacted in the light
of new, emerging challenges and opportunities in the financial sector seeks to
update the laws for licensing and regulation of the financial industry. Key revisions in
the BOFI Act 2020 include amongst others Licensing and Operation of Banks;
Establishment of a Banking Sector Resolution Fund; and Establishment of a Special
Tribunal for the Enforcement and Recovery of Eligible Loans
SOME NOTABLE PROVISIONS OF THE ACT THAT IMPACT ON FINTECH COMPANIES
IN NIGERIA

Fintech Companies As “Other Financial Institutions”

• By virtue of Section 130 of the Act certain fintech companies are now expressly
described as “Other Financial Institutions”.
• The Act now defines other Financial Institution to include “any individual, body,
association or group of persons; whether corporate or unincorporated other than
the banks licensed under this Act, which carry on the business of a discount house,
bureau de change, finance company, money brokerage, authorised buying of foreign
exchange, International Money Transfer Services , mortgage refinance company,
mortgage guarantee company, financial holding company or payment service
providers regardless of whether such businesses are conducted digitally, virtually or
electronically only and companies whose objects includes factoring, project
financing, equipment leasing, debt administration, fund management, private ledger
services, investment management, local purchases order financing and such other
businesses as the bank may from time to time, designate regardless of whether such
businesses are conducted digitally, virtually or electronically only” (emphasis ours).
• By the amended definition of “Other Financial Institutions” under the Act, fintech
companies have now been brought under the regulatory purview of BOFIA.

Licensing Requirements
• Section 57 to 58 of the Act provides that no institution shall carry on business as an
OFI without being duly incorporated in Nigeria; and obtaining a license from the
Central Bank of Nigeria (CBN).
• OFIs operating without a license before the Act, are to within 3 months (of the
passage of the Act), apply in writing to the CBN for a license.
• Section 58(5) of the Act also introduced penalties for transacting other financial
banking business without a valid license, to attract imprisonment for a term of not
less than 3 years or a penalty of the higher of N10,000,000 or two times the
cumulative amount collected or both such imprisonment or fine.

Regulatory and Supervisory Power of The CBN Over OFI (Other financial
institution)
• Section 60 of the Act enacts the right of the Governor of the CBN to appoint one or
more officers of the CBN to supervise banks and OFIs, who shall have the right to
inspect books of accounts (the mandate of OFIs to keep proper books of account in
respect of all transactions is provided under Section 23 of the Act) and to require
from the OFI certain information in exercise of its supervisory duties.
• The CBN also has the mandate to share information on OFIs and permit other
agencies to have access to the books and records of OFIs.
• Section 69 (1) of the Act also provides that the CBN may prescribe the
administration and standard, governing operations relating to payment, settlement
and clearing.

Risk Based Capital Requirements

Section 63 (1) of the Act empowers the CBN to issue a notice requiring OFIs to
maintain capital of such amount not less that the paid-up share capital requirement
as may be designated by the CBN through the various guidelines issued by the CBN.

Restriction on Certain Use of Names

Section 43 of the Act provides that no person with the object to offer payments and
other financial services shall be registered by the Corporate Affairs Commission
(CAC) with the word “fintech” or any of the derivatives either in English language or
any other language included in the description or title under which the person is
carrying on business in Nigeria without the consent of the Board of the CBN.
REFERENCES
1. https://www.cbn.gov.ng/Out/2021/CCD/BOFIA%202020.pdf

2. https://tonbofa.com/home/wp-content/uploads/2021/03/The-Banks-And-
Other-Financial-Institutions-Act-2020.pdf