CBN Limits Contract Suspension to Two Business Days

The Central Bank of Nigeria (CBN) has clarified the maximum period for suspending certain contractual obligations during bank resolution, limiting it to two business days. This guidance, issued by Okei Umeano, Director of the Financial Market Department, takes immediate effect.

The CBN's circular addresses the absence of a clearly defined maximum duration for exercising powers under sections 34(2)(b) and 40(2) of the Bank Financial Institutions Act (BOFIA) 2020, which had created uncertainty for banks and their counterparties. The new guidance specifies that the suspension of payment and delivery obligations related to contracts involving a failing bank will not exceed two business days from the date of the written notice issued by the CBN governor.

This measure aims to enhance certainty for market participants and facilitate better management of commercial risks. The CBN's authority to suspend contracts is part of its broader framework to preserve financial stability and manage troubled banks effectively.