How To Acquire A Commercial Bank License In Nigeria – Financial Services – Finance and Banking

Introduction

A bank license is a legal document that authorises a financial
institution to operate as a bank and conduct banking activities.
The bank license shows that the financial institution has met
government regulations and requirements to protect its
customers’ money and data. It indicates that the bank is safe
and secure for customers to use.

To receive a bank license, a financial institution must file an
application with the appropriate regulatory authorities, such as
the Central Bank. This usually includes completing capital
requirements, demonstrating operational preparedness, and passing
“fit and proper” assessments on the management team.

Legal Framework Governing Banking License

• The Central Bank of Nigeria Act 2007: It established the
  Central Bank of Nigeria as the regulating body responsible for
  providing banking licences in Nigeria.

• he Banks and Other Financial Institutions Act
  (“BOFIA”) requires all banks in Nigeria to have a valid
  license to do banking operations.

• The Central Bank of Nigeria’s (“CBN”) Regulations
  on Scope of Banking Activities and Ancillary Matters, No. 3, 2010:
  It enhanced the scope and framework for banking business in
  Nigeria.

• Companies and Allied Matters Act (“CAMA”): Banks in
  Nigeria must comply with the Companies and Allied Matters Act
  (“CAMA”) and be incorporated as companies.

Types of Banking License

The Central Bank of Nigeria (CBN) issues key categories of
banking licenses, including:

1. Commercial Banking License:
   

   • Allows banks to receive deposits, make loans, and provide a
     variety of financial services.

   
   

   • National commercial banks must have a minimum paid-up capital
     of ₦25 billion, while regional banks must have ₦10
     billion and international commercial banks need ₦50
     billion.

   
   

   • Commercial banks can operate in all states of Nigeria or in a
     specific region, depending on the licensing type.

2. Merchant Banking License:
   

   • Allows banks to offer firms specific financial services such as
     advising, underwriting, and corporate restructuring.

   
   

   • The minimum amount of paid-up capital is ₦15
     billion.

   
   

   • Certain retail banking practices are restricted for merchant
     banks, such as accepting deposits that can be withdrawn by
     cheque.

3. Specialized Banking License:
   

   • It includes non-interest banks, microfinance banks, development
     banks, mortgage banks, and other CBN-designated institutions.

   
   

   • Minimum paid-up capital varies by institution type, from
     ₦5 billion to ₦10 billion.

   
   

   • These specialised banks focus on providing financial services
     for certain sectors or segments of the population.

How to Obtain a Commercial Bank License

The key steps to obtain a commercial bank license in Nigeria
are:

1. Grant of Approva in Principle




2. Grant of Final License




3. Pre-Commencement of Operations Requirements

1. Requirements for Grant of Approval-in-Principle
(AIP)

• Submit a formal application to the Governor of the Central Bank
  of Nigeria (CBN) for a banking license.

• The application must include a feasibility report, draft
  Memorandum and Articles of Association, list of
  shareholders/directors/officers, non-refundable application fee of
  ₦500,000.00 and any other required documents.

• The applicant must deposit the minimum paid-up capital of
  ₦25 billion with the CBN.

• The CBN will review the application and may issue an Approval
  in Principle with or without conditions or refuse to issue the
  license.

2. Requirements for Grant of Final
License

• Within 6 months of receiving the Approval in Principle, the
  applicant must submit an application for the final banking
  license.

The documents required include:

• Non-refundable licensing fee of N5,000,000 in bank draft
  payable to CBN.




• 3 copies each of: Certified true copy (CTC) of Certificate of
  Incorporation of the bank, CTC of MEMART, CTC of Forms CO2
  (Allotment of shares) and CO7 (particulars of directors).




• Evidence of location of Head Office/Branch Building (rented or
  owned) for the take-off of banking business.




• Changes (if any) in the Board, Management and Shareholding
  should be clearly stated for necessary appraisal.




• Evidence of strongroom, loading bay and Banking Hall
  Facilities.




• Bullion lorries with necessary security gadgets.




• Evidence of installation I.T. facilities/computerization.




• Copies of letters of offer and acceptance of employment in
  respect of the Management Team.

• The CBN will review the application and may issue the final
  banking license

3. Pre-Commencement of Operations
Requirements

• Before commencing operations, the bank must submit additional
  documents to the CBN, such as:

• Evidence of admission into the clearing house.




• Copy of shareholders register




• Copy of share certificate issued to each investor.




• Draft copy of opening statement of affairs signed by directors
  and auditors.




• Evidence of insurance coverage for cash such as Cash-In-Transit
  (CIT), Cash on Counter, Strong room/ Vault, etc, insurance
  policies.




• Manual of Operation.




• Evidence of readiness of cheques and other security
  documents.




• Minutes of Pre-Commencement Board Meeting.




• Evidence of adequate security arrangements – physical and
  logical such as:
  

  1. Uniformed and/or plain cloth policemen

  
  

  2. Uniformed security guards

  
  

  3. CCTV especially in the banking hall, strong room and loading
     bay areas

  
  

  4. Raid alarm (especially foot operated type) inside the teller
     cubicles, and fire alarms at strategic points within the
     premises

  
  

  5. Regiscope camera

  
  

  6. Cash movement & escort vans fitted with communication
     equipment

• The CBN will review the documents and grant approval to
  commence banking business.

Conclusion

A bank license is a fundamental regulatory approval that permits
a financial institution to operate as a genuine bank and provide
banking services to customers while under the supervision and
protection of the appropriate authorities.

The key steps to obtain commercial bank license are to submit an
initial application for Approval in Principle, then apply for the
final banking license, and finally meet the pre-commencement
requirements before commencing operations.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.