The Central Bank of Nigeria has continued to churn out different policies and programmes in an effort to stabilise the economy and improve Naira liquidity among other things. Now the CBN is involving foreign banks to boost dollar loans.
Coming from the backdrop of scarce forex in Nigeria, which at some point was a cause of serious trouble in the aviation sector and banking industry, the CBN approved that authorised foreign banks’ should give dollar loans in foreign currency-denominations (Dollar Loans) to Nigerian companies.
Foreign banks in Nigeria have been told by the CBN to work with their parent bodies to provide Dollar loans to Nigerian companies.
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The ‘Guidelines for the Regulation of Representative Offices of Foreign Banks in Nigeria’ was made available by the CBN’s Director of Financial Policy and Regulation Department, Muhammad Musa.
He said: “The CBN’S policy aligns with it’s mandate to promote financial system stability”.
CBN Guidelines For Foreign Banks
Musa explained that any bank or financial institution licensed under any foreign law with head office outside Nigeria, that accepts deposits and grants loans is covered by the guidelines.
Furthermore, this, covers any foreign-owned operating bank/financial company that is foreign-based and owns interest in one or more banks whose business is around the receipt of deposits, loans and provision of current and savings accounts.
He also said that approval was given to banks to market the products and services of its foreign parent or an affiliate of the foreign parent licensed and domiciled outside Nigeria.
According to Musa, they can carry out research activities in Nigeria on behalf of the foreign parent and also serve as a liaison between the foreign parent and local banks, and other customers of the foreign parent based in Nigeria.
The foreign banks can also got approval to connect banks and other financial institutions to their parent firm and assist exporters in Nigeria with information related to the laws and markets of target countries.
Responsibilities Of Foreign Banks
Part of the responsibilities include collating and distributing economic and financial information or country reports to its foreign parents for use by their customers.
Also, they are to assist their customers who desire to invest in Nigeria or do business with Nigerian companies subject to the extant Data Protection Regulations.
“They are also authorised to connect exporters with potential customers in jurisdictions where the parent company operates; and assist Nigerian exporters with finding new markets through its international offices.
“Representative offices are permitted to record revenue, in so far as such revenue does not relate to non-permissible activities as set out in section 3.2 below and emanates from intra-group services rendered to the parent company with such revenue taxed in accordance with transfer-pricing regulations.
“Revenue in this provision is limited to line items such as staff costs and business premises leasing fees,” the CBN said.
However, the banks are not allowed to provide services designated in Nigeria as banking business and provide any commercial or trading activity that may lead to the issuance of invoices for services rendered.
Guidelines For Establishing A Representative office
In establishing a representative office in Nigeria, the CBN said a Memorandum of Understanding (MOU) between the CBN and the applicant’s home regulatory supervisor is essential.
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“Where such an MOU is non-existent, the CBN will work with the home regulatory agency to establish/execute an MOU as soon as possible.
“Not later than three months after obtaining the Approval-In-Principle, the promoters of a proposed office shall submit an application for the grant of a final license to the CBN,” the apex bank said.
Also, the CBN has intensified measures to achieve optimum dollar supply through expanding domestic capacity and to boost non-oil export earnings.