Stricter enforcement of insider credit rules has forced several bank owners, major shareholders, and board members out of Nigeria’s financial sector, the Central Bank of Nigeria (CBN) has disclosed.
The regulator also warned that remaining directors risk immediate removal if they continue to breach insider lending limits.
Speaking on the crackdown, Dr. Olubukola Akinnwunmi, CBN Director of Banking Supervision, stated that the apex bank has repeatedly stepped in to demand the removal of non-compliant board members following its February 2025 circular on insider credit—loans extended by banks to their directors, executives, major shareholders, or related entities.
The enforcement drive forms part of broader efforts to rebuild corporate governance and protect the industry from the vulnerabilities that led to the recent recapitalisation exercise.
“We have had instances where we pointed out to banks that if persistent insider credit continues, the affected individuals can no longer remain on the board,” Akinnwunmi said, noting that several high-profile shareholders and directors have already exited the system as banks tighten monitoring.
He warned that weak governance and unchecked insider lending could quickly undermine the stability achieved through recapitalisation.
“If poor corporate governance and pervasive insider credit are left unchecked, we will soon see a repeat of the very problems we just dealt with,” he warned, adding that under Governor Olayemi Cardoso, the CBN is enforcing prudential rules—including single-obligor limits and large exposures—“strictly to the letter.”
Reflecting on past financial crises, Akinnwunmi observed that bank collapses are rarely caused by capital shortages alone. Instead, global experience shows that failures are almost always preceded by governance breakdowns, excessive risk-taking, weak board oversight, and insider abuse.
To tackle these systemic risks, the CBN is introducing a risk-based capital framework. Rather than requiring all institutions to hold the same flat minimum capital, the new model forces banks carrying higher risk profiles—especially those heavily exposed to insider credit—to maintain significantly larger capital buffers.
“Engaging heavily in insider credit will now require a bank to hold more capital,” Akinnwunmi explained. “It is no longer just about meeting a uniform baseline requirement; capital must directly reflect the level of risk a bank chooses to take based on its business model and governance practices.”
