As part of the plans to boost the Nigerian economy, President Muhammadu Buhari has signed the Banks and Other Financial Institutions Act 2020, aimed at strengthening the country’s financial system towards protecting stakeholders in the sector, into law.
Buhari said that the law would aid the Federal Government moves that banks and other financial institutions be strengthened and made to channel their much-needed credit to support economic recovery and promote sustainable growth in the country.
He described the bill signed into law as historic and that it remains a significant achievement that would enhance the soundness and resilience of Nigeria’s financial system.
The president, in a statement by his Senior Special Assistant Media and Publicity, Garba Shehu, on Friday, stated that signing of the bill into law without delay was yet another indication of effective and productive collaboration between the Executive and Legislative arms of Government.
With the new law, the Banks and Other Financial Institutions Act 1991 as amended would cease to exist, while the Federal Government begins implementation of BOFI Act 2020, which was expected to enhance the soundness and resilience of the financial system for sustainable growth and development of the Nigerian economy.
In this respect, it introduces a credit tribunal to improve loan recovery and address the incidence of high non-performing loans within the financial system, which has been a key deterrent to lending by financial institutions.
Furthermore, it strengthens the regulatory and supervisory framework for the financial industry and provides additional tools for managing failing institutions and systemic distress to preserve financial stability amongst others.
As contained in the new law, the Central Bank of Nigeria (CBN) would hold structured engagements with stakeholders across various sectors of the economy on critical aspects of the Act in the coming months.
Other critical aspects of the law include that CBN governor now has the powers to impose and review penalties on prevalence of infractions in the banking sector to a maximum amount of N100 million.
In the approved Bill, single Obligor limits for Merchant Banks was revised to 50 percent of unimpaired shareholders funds; while the single Obligor limits for specialised backs and other Financial Institutions will be a percentage determined by the CBN Governor from time to time, just as unsecured lending for Directors of Banks was reviewed downwards from N3,000,000 to N1.000.000 without prior approval of the CBN.
The passage was sequel to the presentation of the report of the Senate Committee on Banking, Insurance and other Financial Institutions by the Chairman, Senator Uba Sani, APC, Kaduna Central on the Banks and Other Financial Institutions Act CAP B3 LFN 2004( Amendment) Bill, 2020.( S.B.178)
Meanwhile, the lawmakers dropped section that recommended that President of the country should be empowered to prescribe Trade Unions due to existing labour Laws and also the Nation’s commitments to the International Labour Organisation, ILO.
According to the Uba Sani, the sponsor of the bill, Banks and Other Financial Institutions Act (Repeal and Re-enactment) Bill 2020 seeks to update the existing Act and bring it in line with global best practices.
Other objectives, according to him, include ‘better clarifying and accurately delineating the regulatory functions of the Central Bank of Nigeria in the financial services industry and updating and incorporating the laws for enacting, licensing and regulation of Micro-Finance Banks in the country.
The old Act which was enacted about 30 years ago and has, according to the senator has become obsolete as a lot of changes have taken place in the strategic banking sector giving rise to new and emerging challenges and opportunities.
He enumerated the objectives of the bill as seeking to update the laws governing Banks, Financial Institutions, and Financial Services Companies as well as to enhance efficiency in the process of obtaining/granting banking licenses.
Other objectives, according to Senator Sani, include ‘better clarifying and accurately delineating the regulatory functions of the Central Bank of Nigeria in the financial services industry and updating and incorporating the laws for enacting, licensing and regulation of Micro-Finance Banks in the country.