2016 Guidelines for Banking Operations in the Free Zones in Nigeria: Need We Caution the CBN?

Abstract

On 2 February 2016, the Central Bank of Nigeria (CBN) released certain Guidelines to regulate banking operations in the free zones in Nigeria titled “Guidelines for Banking Operations in the Free Zones in Nigeria 2016” (CBN Guidelines). Essentially, the CBN Guidelines aims to: (x) complement and enhance the provisions of the Free Zones (FZs) Acts; (y) provide details of regulatory and supervisory requirements necessary to promote efficient and sustainable banking services in Nigeria’s FZs; (z) spell out details of permissible and prohibited activities of banks in Nigeria’s FZs; and (zz) provide details of incentives available to banks in Nigeria’s FZs.

No sooner had the CBN Guidelines been released than two schools of thought emerged. While proponents of the first school of thought argue that the CBN’s approach is eminently sensible, in the sense that any bank which now desires to carry out banking operations in any Free Trade Zone (FTZ) would now require banking license from CBN, in addition to the FTZ authorisation from NEPZA, proponents of the second school of thought contend that: (x) the CBN cannot, by mere guidelines, declare that banks carrying on business in the FTZs are no longer branches of Nigerian banks but full-fledged separate businesses and; (y) that the spirit of NEPZA, if not the letters, do not support this “seemly-innocent-good-intention” of the CBN.

It is against this backdrop that it becomes imperative to critically examine the propositions of the two schools of thought in the light of existing legal framework in Nigeria. In doing justice to this topic, efforts will be made to examine relevant provisions of the Nigeria Export Processing Zones Act (NEPZA), Oil and Gas Export Free Zone Act (OEFZA), the Bank and Other Financial Institutions Act (BOFIA), the CBN Act and case law. In addition, the points considered in this paper will be considered under three major headings: (x) the legal regime under the NEPZA; (y) powers of the CBN under the BOFIA and the CBN Act; and (z) testing the CBN Guidelines against the existing legal framework.

Keywords: Free Trade Zone, Banking license, CBN Guidelines, Subsidiary legislation, regulatory affairs