Announcements Research

Nigeria Banking Sector 2021: Frequently Asked Questions on Banks and Other Financial Institutions Act (BOFIA 2020)

Summary

29 January 2021 – GCR Ratings (“GCR”) has published a Special Report on the Banks and Other Financial Institutions Act (BOFIA 2020), Nigeria.

The report is available for download at: http://gcrresearch.com/reports/house/industry-reports/.

In November 2020, the ‘Banks and Other Financial Institutions Act’ (“BOFIA”) was signed into law by President Muhammadu Buhari, replacing BOFIA 1991. BOFIA 2020 is the primary legislation for the regulation of all banks and financial institutions in Nigeria. It defines the powers of the Central Bank of Nigeria (“CBN”), stipulates the licensing requirements for banks and other financial institutions and regulates their operations. The Nigerian Government’s primary aim through the adoption of BOFIA 2020 is to strengthen regulatory oversight in the Nigerian financial sector with a particular focus on implementing additional tools for managing failing institutions and systemic distress to preserve financial stability.

While GCR Ratings does not expect BOFIA 2020 to have significant implications on the credit profile of rated banks within the next 12 to 18 months, over the longer-term, we expect that it will have positive credit implications for the banking system as a whole. We judge the increased regulatory oversight brought in by BOFIA 2020 will enhance the soundness and resilience of Nigeria’s financial system, and ultimately increase investors’ confidence in the financial sector. We also expect additional tools introduced to manage failing institutions and systemic distress (e.g., the ability to revoke the licenses of banks involved in unacceptable practices) will improve the credibility of players.

This publication answers some frequently asked questions relating to BOFIA 2020, with an evaluation of the likely impact from a credit perspective.

GCR will periodically provide insights on key sectors/industries across different territories in which various rated entities are domiciled, encompassing changes in the operating environment, performance trends and its view of the impact of an evolution in market dynamics on the credit risk profiles of rated entities in selected industries.

Analytical Contacts

Primary analyst Funmilayo Abdulrahman Senior Analyst
Lagos, Nigeria Funmilayo@GCRratings.com +2341 904 9462-3
Primary analyst Julius Adekeye Head of Nigerian Ratings
Lagos, Nigeria Adekeye@GCRratings.com +2341 904 9462-3
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