The Central Bank of Nigeria (CBN) has proposed a comprehensive regulatory framework aimed at strengthening financial stability, enhancing consumer protection and preventing risks within one financial institution from spreading across affiliated entities.

The proposals are contained in the apex bank’s newly released Exposure Draft Guidelines on Ring-Fencing Operations of Closely Linked Entities in the Nigerian Financial System, which seeks to establish clear operational, governance and financial boundaries among institutions operating under common ownership structures.

According to the CBN, the framework is designed to address the increasing convergence of banking, payments, lending, wealth management and other financial services businesses, many of which are now closely interconnected through group structures.

The draft guidelines, signed by the Director of the Financial Policy and Regulation Department, Dr. Rita Sike, stated that the initiative was developed in line with the bank’s mandate to promote a safe, sound and stable financial system while safeguarding consumer interests and strengthening regulatory oversight.

The apex bank explained that the proposed framework would establish clear operational and functional boundaries among closely linked entities and curb regulatory arbitrage arising from the commingling of activities across different licensing categories.

Under the proposals, regulated institutions would be required to maintain distinct governance structures, operational independence and financial accountability, even when operating within the same corporate group.

One of the key provisions limits the number of directors who can serve simultaneously on the boards of closely linked entities to 20 per cent of the total board membership of an institution.

The CBN is also proposing stricter restrictions on personnel sharing within financial groups. Except where permitted under existing Shared Services Guidelines, employees would be prohibited from holding concurrent positions in affiliated entities.

The draft further seeks to reinforce operational independence by requiring institutions to maintain separate critical functions and technology infrastructure.

According to the regulator, entities would not be allowed to use information technology platforms to offer services outside the scope of their licences, even if affiliated companies within the same group are authorised to provide such services.

The framework also prohibits institutions from facilitating customer transactions on behalf of affiliated entities through their technology platforms, a measure aimed at ensuring greater transparency and regulatory compliance.

In addition, the CBN reserved the authority to mandate the physical separation of data centres where necessary to reduce contagion risks and ensure that each institution can operate independently.

The proposed rules introduce tighter controls on intra-group funding arrangements, requiring every regulated institution to meet capital adequacy and liquidity requirements on a standalone basis, irrespective of resources available elsewhere within the group.

The regulator also stated that prior written approval would be required before any intra-group liquidity support can be extended between affiliated entities.

To strengthen consumer protection, the draft guidelines require institutions to obtain customers’ explicit consent before migrating them to services offered by related entities.

The CBN said customers must be provided with adequate disclosures and informed of available alternatives to ensure they clearly understand which institution is providing a particular service.

Another major component of the framework is the introduction of mandatory recovery and resolution plans for closely linked entities. Under the proposal, each institution would be required to develop strategies for restoring financial viability during periods of severe stress and, where necessary, winding down operations in an orderly manner without disrupting the wider financial system.

The apex bank noted that the measures are intended to enhance transparency, accountability and consumer confidence while mitigating contagion risks and supporting innovation and fair competition across the financial services sector.

Stakeholders have been given until July 9, 2026, to submit comments and recommendations on the exposure draft before the guidelines are finalised and implemented.