CBN LIMITS SUSPENSION OF CONTRACTUAL OBLIGATIONS IN FAILING BANKS TO TWO BUSINESS DAYS
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By Aishat Momoh. O.
The Central Bank of Nigeria (CBN) has issued a new interpretative guidance clarifying the application of Sections 34(2)(b) and 40(2) of the Banks and Other Financial Institutions Act (BOFIA), 2020, setting a maximum period of two business days for the suspension of certain contractual obligations during the resolution of failing banks.
The clarification was contained in a circular issued on Wednesday by the Acting Director of the Financial Markets Department, Okey Umeano, with immediate effect.
According to the apex bank, the guidance was introduced to address uncertainty arising from the absence of a clearly defined maximum duration for the exercise of its powers under the relevant provisions of BOFIA.
The CBN noted that the lack of a specified timeframe had created uncertainty for banks, other financial institutions and their counterparties in relation to financial contracts, with the potential to impede effective commercial risk management.
The circular explained that the guidance provides interpretative and operational direction on how the CBN will exercise the powers conferred on its Governor under Sections 34(2)(b) and 40(2) of BOFIA.
It stated that the directive applies to banks, other financial institutions and counterparties to what it described as “Affected Contracts”—contracts involving banks or other financial institutions that fall within the scope of the two provisions.
Under the new framework, any suspension of payment or delivery obligations involving a failing bank under Section 34(2)(b), as well as the suspension of contractual termination rights under Section 40(2), must not exceed two business days from the date the CBN Governor issues a written order or notice of suspension.
The clarification relates to the CBN’s bank resolution framework. Section 34(2)(b) of BOFIA empowers the apex bank to facilitate the acquisition of a failing bank by one or more financial institutions to preserve financial stability, while Section 40(2) authorises the CBN Governor, following the revocation of a banking licence and where it is in the public interest, to commence resolution actions, including the temporary suspension of certain contractual termination rights.
The CBN said the introduction of a two-business-day limit provides greater certainty for market participants by ensuring that any suspension arising from the exercise of its statutory resolution powers remains temporary.
The circular comes shortly after the apex bank revoked the licences of 46 inactive, insolvent or non-operational microfinance banks under the provisions of BOFIA.
Although the guidance is not linked to any specific institution, the CBN said it clarifies how contractual obligations will be treated whenever it exercises its statutory powers over troubled financial institutions.
The apex bank added that the guidance was issued pursuant to the powers conferred on the CBN Governor under Section 56 of BOFIA and Section 33(1)(b) of the Central Bank of Nigeria Act, 2007, and took effect from July 1, 2026.
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