On November 13, 2020, Nigeria’s President Muhammadu Buhari has assented to the Banks and Other Financial Institutions Act (BOFIA) 2020, which repeals the Banks and Other Financial Institutions Act 1991 as amended.
President Muhammadu Buhari states on Twitter: “The BOFI Act 2020 is a historic and significant achievement that will enhance the soundness and resilience of Nigeria's financial system. It is also yet another indication of effective and productive collaboration between the executive and legislative arms of government.”
The new Act has attracted widespread attention from supporters who believe that the new legal framework will strengthen the regulation of banks and prevent potential distress in the banking industry, to opposers who criticize the increase of Central bank’s (CBN) powers making procedures more complex and less flexible.
It is important to highlight that CBN’s powers as stated in the old Act have been maintained in the new one such as the clause on the Bank’s power to turn down an application for a license without necessarily explaining its refusal . as well as CBN authority over the opening or shutting down of bank branches .
However, under the BOFIA Act 2020, a new section 12 (6) has been added making CBN’s decision irrevocable. According to the new section the court cannot grant a restorative order when CBN revokes a bank’s license.
One of the key provisions of BOFIA 2020 is to hold bank officials personally liable for any failures to seek compliance with their conditions of license. In case of non-compliance, the bank officials risk the penalty of a minimum 3 years imprisonment or a fine of N2,000,000 or both imprisonment and fine.
Under Section 101, the new Act established a body to be known as the Special Tribunal for the Enforcement and Recovery of Eligible Loans. The tribunal’s main competencies are to enforce security agreement and the recovery of eligible loans by banks and financial institutions
Under the new Act, the penalty for conducting a banking business without a valid license has now been increased from N2,000,000 to N50,000,000 with the obligation to refund the deposits to account holders.
In regard to imposing penalties, CBN’s powers have been remarkably enlarged considering that in case of failure to comply with the Act's rules, CBN may impose a penalty of N100,000,000 (unlike N2,000,000 under the old Act) ,suspends any licence issued or given to any bank, get back any pecuniary benefit obtained, suspends from participation in bank clearing systems and any other sanctions CBN may deem appropriate.