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The Central Bank of Nigeria (CBN) has issued a new regulatory guidance limiting the suspension of payment obligations and contractual termination rights involving banks and other financial institutions under regulatory intervention to a maximum of two- business -day.
The move according to the apex bank is aimed at boosting market confidence and reducing uncertainty in the financial system.
In a circular addressed to all banks and other financial institutions on Wednesday, the apex bank said the clarification became necessary following concerns that the absence of a defined maximum duration for the exercise of its powers under the Banks and Other Financial Institutions Act (BOFIA), 2020, had created uncertainty for counterparties engaged in financial contracts with Nigerian banks.
According to the CBN, the uncertainty have the potential to impede effective commercial risk management and weaken confidence among domestic and international market participants.
The circular, signed by the Acting Director of the Financial Markets Department, Okey Umeano, provides interpretative guidance on the practical application of Sections 34(2)(b) and 40(2) of BOFIA.
It explained that, going forward, any suspension of payment or delivery obligations under an affected financial contract, as well as any temporary restriction on the exercise of contractual termination rights arising from a bank resolution process, shall not exceed two business days from the date the CBN Governor issues the relevant written order or notice.
The guidance applies to what the regulator describes as “Affected Contracts”—contracts to which a bank or other financial institution is a party and which fall within the provisions of Sections 34(2)(b) or 40(2) of BOFIA. Section 34(2)(b) of BOFIA empowers the CBN Governor to suspend payment or delivery obligations where a bank or other financial institution is failing, while Section 40(2) authorises the temporary suspension of counterparties’ rights to terminate certain financial contracts when an institution is subject to, or proposed to be subject to, a resolution measure.
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Until now, the law did not prescribe the maximum duration of such suspensions, leaving counterparties uncertain about how long contractual obligations or termination rights could remain on hold.
The CBN said the clarification would provide greater operational certainty for banks, financial institutions, investors and other counterparties while supporting effective risk management during periods of financial stress. Commenting, economic analysts say the two-business-day limit aligns with international best practices for bank resolution frameworks, where regulators are permitted to impose only short-term stays on contractual rights to allow authorities sufficient time to implement resolution measures without triggering widespread market disruption.
They noted that guidance is also expected to reassure foreign investors and financial institutions that transact with Nigerian banks by establishing a clear and predictable timeframe for the temporary suspension of contractual obligations during regulatory intervention.
The CBN noted that the circular was issued pursuant to the powers conferred on the Governor under Section 56 of BOFIA and Section 33(1)(b) of the Central Bank of Nigeria Act, 2007.
According to the circular, the interpretative guidance takes immediate effect and is expected to guide all banks, financial institutions and counterparties in understanding the operational approach the regulator will adopt when exercising its statutory powers under the relevant provisions of BOFIA.
The clarification represents another step in strengthening Nigeria’s bank resolution framework by balancing the regulator’s intervention powers with the need to preserve contractual certainty and maintain confidence in the country’s financial markets.
