The Central Bank of Nigeria (CBN) is planning a major structural shakeup in the financial sector, proposing strict new rules to legally and operationally separate commercial banks from their financial technology (fintech) subsidiaries and other closely linked entities.
The move is designed to build an impenetrable firewall around commercial banks, ensuring that customer deposits are not used to bankroll, subsidize, or rescue affiliated businesses.
In a draft circular dated June 10, titled *“Exposure of the draft guidelines on ring-fencing operations of closely linked entities in the Nigerian financial system,”
the apex bank outlined a rigorous framework aimed at ending the era of shared resources, commingled funds, and regulatory gray areas.
Here is a detailed breakdown of the CBN’s proposed guidelines and what they mean for the Nigerian financial ecosystem.
The Target: Ending Regulatory Arbitrage and Contagion
Over the last decade, several Nigerian banks have aggressively expanded into the fintech, payments, and asset management spaces, often operating these subsidiaries under the same corporate umbrella.
The CBN warns that this integration has created “regulatory arbitrage”—where companies exploit loopholes between different license categories—and heightened the risk of financial contagion. Under the new guidelines, a “closely linked entity” is defined as any company that controls, is controlled by, or shares common management, branding, systems, or contractual dependence with a bank.
To mitigate these risks, the CBN is mandating that these entities operate as entirely separate businesses. They must maintain their own board of directors, distinct risk management frameworks, and meet capital adequacy and liquidity requirements independently, without relying on the parent bank’s financial muscle.
Strict Firewalls on Customer Funds and Data
One of the most consequential directives in the draft guidelines is the absolute segregation of customer deposits and data.
Zero Commingling of Funds: The CBN explicitly states that customer deposits in commercial banks must not be used for intra-group lending, proprietary trading, servicing the debts of sister companies, or covering the operational costs of affiliates.
Independent Data Warehousing: Customer data cannot be shared freely across subsidiaries to prevent unauthorized cross-selling. Banks must store customer data on separate, independent servers
Explicit Customer Consent: Banks will no longer be allowed to automatically sign up depositors for services offered by their fintech affiliates. Customers must give explicit, informed consent in “clear, simple language” before being onboarded onto any affiliate product, and banks must offer alternative options where available.
Tight Reins on Intra-Group Transactions
To prevent banks from quietly propping up struggling fintech arms, the CBN is putting intra-group transactions under a microscope.
* No bank or closely linked entity will be allowed to extend loans or guarantee the financial obligations of an affiliate without prior written approval from the CBN.
* Any approved intra-group transactions must be conducted at arm’s length (at standard market rates) and reported to the regulator on a quarterly basis.
The HoldCo Mandate or License Surrender
For financial institutions with complex corporate structures, the CBN has issued an ultimatum: promoters of closely linked entities must establish a Non-Operating Holding Company (HoldCo) to oversee the separate businesses.
For shareholders who do not wish to adopt the HoldCo structure, the CBN offers a stark alternative: they must merge their businesses and surrender excess, overlapping licenses.
What Lies Ahead?
The CBN’s ring-fencing policy represents a pre-emptive strike to protect depositors in an increasingly digital and interconnected financial landscape. By forcing banks and fintechs to operate at arm’s length, the regulator aims to protect the core banking sector from the high-risk, cash-burning nature of tech startups.
The financial regulator has opened the floor for public and stakeholder feedback on the draft guidelines, with all submissions expected no later than July 9. If implemented in its current form, Nigerian financial groups will face a race against time to restructure their operations, technology stacks, and governance models.
