Every rule invites the search for its loophole. That is not cynicism; it is how regulated markets actually behave.
The CBN’s draft holding company guidelines, the most important document the banking sector will read this year, are admirable in intent and open to comment, which is exactly why they deserve to be stress-tested before July 9 rather than after.
So let me play the role every good draft needs played: the person who reads it looking for the door marked exit.
Here is the door I found.
Downgrade the international banking license to national
The CBN’s draft holdco guidelines instruct groups to lift their foreign banking subsidiaries out of the Nigerian bank and hold them at the holdco or through an intermediate holdco. The logic is sound. But it opens a question the draft never answers.
The international banking licence exists for one reason: to authorise offshore operations. Its N500bn minimum capital is the price of that ambition. So if the foreign subsidiaries are the very thing being removed from the Nigerian bank, why does that Nigerian bank still need an international licence at all?
Strip out the offshore network and the Nigerian banking entity starts to look exactly like Stanbic IBTC or Ecobank Nigeria. A domestic, national bank sitting inside a larger group whose continental footprint lives elsewhere. And national authorisation is N200bn, not N500bn.
A group that just raised to satisfy a N500bn international minimum could, post-restructuring, be carrying a Nigerian bank that genuinely only needs N200bn, because the N300bn premium was paying for offshore operations that no longer sit there.
The draft says nothing about this. It assumes the bank’s capital stays exactly where it is while the foreign subsidiaries migrate upward, but it offers no reason the bank should keep an international licence it no longer uses.
Either the CBN expects groups to maintain an international licence with no international operations, which is incoherent, or the restructuring quietly releases N300bn of bank-level minimum capital, which is a major omission the draft has not acknowledged.
One begins to suspect the 20 per cent holdco surcharge and the paid-in-only capital definition are, consciously or not, the mechanism for clawing back at the parent exactly the capital the restructuring would release at the bank.
If that is the intent, the CBN should say so plainly. And if it is not, then the licence tier logic and the capital architecture need to be reconciled in the same document, rather than left for boards and their advisers to arbitrage in the years to come. A reform this consequential should not leave its single largest capital question to inference.
One honest caveat, however: the CBN could close the lacuna with a single sentence in the final text: any bank within a holdco that holds, directly or through an intermediate holdco, foreign subsidiaries at group level shall maintain international authorisation and the corresponding minimum capital.
If they add that, the licence-tier arbitrage disappears, though it would then raise another point, that the group is paying N500bn of bank capital plus a 20 per cent holdco surcharge for a Nigerian bank doing national-bank work. So the lacuna cuts both ways: either there is an unacknowledged capital release, or there is double-counting of capital against operations that have left the building.
The offshore Holdco manoeuvre
The CBN does not want the Nigerian bank holding the group’s foreign banking subsidiaries. It wants them at the holdco, or under an intermediate holdco. Fine. The continental network must move up and out of the Nigerian bank. So I lift it out, and in doing so my Nigerian bank no longer has any offshore operations to justify an international banking licence.
I downgrade it to a national licence, dropping my bank-level minimum from N500 billion to N200 bilion. Then I register my intermediate holding company in a friendly jurisdiction, Example, Mauritius, being an obvious candidate given its treaty network and its long use as the holding layer for African financial assets.
At each financial year end, the African subsidiaries upstream their profits in dollars to the Mauritius vehicle rather than back to Lagos. I arrange a dual listing, London for the international capital and visibility, NGX to keep the domestic regulator and shareholders content. And then, as the saying goes, I go to sleep.
Look at what that structure does to Nigeria. The capital that the international licence was holding onshore is released. The dollar profits of the continental network, which historically cycled back through the Nigerian parent, now pool offshore, adding a quiet, structural source of demand for dollars and pressure on the naira at every year end.
The centre of gravity of one of Nigeria’s banking champions drifts to Port Louis and London. None of this is illegal. None of it is even aggressive. It is simply the rational response to the incentives the draft creates. The guidelines push the foreign subsidiaries out of the bank but say nothing about where the holdco must be domiciled, nothing about the licence tier the emptied Nigerian bank should retain, and nothing about ring-fencing the upstreamed foreign earnings.
I do not believe this is the CBN’s intention. That is precisely the point. The unintended consequence is the most dangerous kind, because nobody defends it, nobody owns it, and by the time it shows up in the FX data it is already structural.
The succession time-bomb
Now the second consequence, the one that ravages the mind once you see it. The draft, read with the existing capital and structural rules, effectively compels Zenith, UBA and Fidelity, among others, to operate as full holdco groups. So consider what that does to the most sensitive process in any bank: succession.
Under the 2023 Corporate Governance Guidelines, where an executive director, deputy managing director or managing director of a bank is appointed to the board of its financial holding company in any role, a 2-year cooling-off period applies.
Read that slowly against the holdco future the draft is building. The natural, indeed the ideal, candidate to chair or lead a banking group’s holdco is the person who just ran the flagship bank. They know the franchise, the risk culture, the regulators, the book.
And yet the very governance rule already on the books says that person must sit out 2 years before they can take a board role at the parent. The succession pipeline that every well-run group relies upon, bank CEO graduates upward to group leadership, is interrupted by a mandatory 2-year gap.
Groups will face a choice between leaving the holdco leadership to less experienced hands, parking their best people in costly limbo, or engineering awkward workarounds that satisfy the letter of the rule while mocking its spirit. The CBN will, without meaning to, have scrambled the leadership planning of half the systemically important institutions in the country at the exact moment those institutions are being restructured.
What the CBN should do with the comment window
I want to be clear that the diagnosis underneath this draft is right. The holdco model was abused. Governance blurred, the bank CEO too often reduced to a lame duck while the group ran the franchise by proxy, and capital and value moved around in ways prudential supervision could not cleanly see.
Moving the African subsidiaries into an intermediate holdco is genuinely good policy and a real value-unlock. The instinct to discipline the structure deserves support.
But intent is not implementation. Three things must be addressed before this becomes law.
- Close the domicile and licence-tier loophole explicitly: state where a holdco may be domiciled, address the treatment of an emptied Nigerian bank’s licence, and decide deliberately whether foreign earnings may pool offshore, rather than leaving the market to discover the answer for itself.
- Reconcile the cooling-off rule with the holdco future the draft mandates, because you cannot simultaneously force groups into holdco structures and forbid their best bankers from leading those holdcos without a two-year penalty.
- Fund the supervision; the CBN needs real governance auditors inside these groups, because rules that go unexamined simply teach the market which ones can be ignored.
