The Central Bank of Nigeria has ordered bank directors with non-performing insider-related loans to step down immediately.

Insider loans refer to loans granted by a bank to its own executives, directors, employees, major shareholders, or related parties.

The directive was issued in a circular signed by the Acting Director of Banking Supervision, Adetona Adedeji, on Monday.

According to the CBN, the decision aims to strengthen corporate governance and improve risk management in the banking sector.

To minimise financial risks, the apex bank instructed banks to take action by recovering debts through collateral enforcement and seizing the shareholdings of affected directors.

“Directors with non-performing insider-related facilities are required to step down immediately from the board, while the bank should commence immediate remediation of the loans through the recovery of the collaterals, including the shareholdings of the affected directors,” the circular reads.

The CBN further directed banks to comply with Section 19 of the Banking and Other Financial Institutions Act 2020 by ensuring proper regulation of insider-related loans.

“Insider-related facilities approved by the CBN without specific timelines: Banks are required to regularise within 180 days all insider-related facilities above the limits prescribed in Section 19(5) of BOFIA 2020, which were approved by the CBN without specific timelines.

“Accordingly, all affected individual director-related facilities should be brought within the prescribed limit of 5 per cent of the bank’s paid-up capital, while the aggregate insider facilities for the bank should not exceed the 10 per cent paid-up capital limit,” it added.

Paid-up capital refers to the total amount of money a company has received from shareholders in exchange for shares.

For insider-related loans approved with specific timelines, the CBN stated that all outstanding loans must be regularised within the permitted period.