Section 19: Restrictions on Certain Banking Activities.

(1) A bank, specialised bank or other financial institution shall not, without the prior approval in writing of the Bank, grant-
(a) to any person any advance, loan or credit facility or give any financial guarantee or incur any other liability on behalf of any person so that the total value of the advance, loan, credit facility, financial guarantee or any other liability in respect of the person is at any time more than 20% of the shareholders' funds unimpaired by losses in the case of a commercial bank, and 50% of the shareholders’ funds unimpaired by losses in the case of a merchant bank, and in the case of specialised banks and other financial institutions, such percentage as the Bank may determine:
Provided that Bank may prescribe-
(i) such other percentages as it may determine, and
(ii) single obligor limits specific to non-interest banks having regard to their peculiarities;
(b) any advance, loan or credit facility against the security of its own shares; or
(c) any unsecured advance, loan or credit facility except it is in line with the regulation on collateralisation as may be issued by the Bank.
(2) For the purpose of subsection (1) (a), all advances, loans or credit facilities extended to any person shall be aggregated and shall include all advances, loans or credit facilities extended to any subsidiary or affiliate of a body corporate or such other related party as the Bank may, by regulation, prescribe;
Provided that subsection (1) (a) does not apply to transactions between banks or between branches of a bank or to the purchase of clean or documentary bills of exchange, telegraphic transfers or documents of title to goods the holder of which is entitled to payment for exports from Nigeria or to advance made against such bills, transfers or documents.
(3) A bank shall not, without the prior approval in writing of the Bank-
(a) permit to be outstanding, unsecured advances, loans or unsecured credit facilities of an aggregate amount in excess of N1,000,000 or such amount as may be prescribed by the Bank to-
(i) its directors, significant shareholders or any of them whether such advances, loans or credit facilities are obtained by its directors or significant shareholders jointly or severally,
(ii) any firm, partnership or private company in which it, or any one or more of its directors or significant shareholders, is interested as director, partner, manager or agent or any individual firm, partnership or private company of which any of its directors or significant shareholders is a guarantor, or
(iii) a public company or private company in which it, or any one or more of its directors or significant shareholders jointly or severally whether directly or indirectly, maintains shareholding of not less than 5% or such percentage as may be specified by the Bank.
(b) permit to be outstanding to its officers and employees, unsecured advances, loans or unsecured credit facilities which, in the aggregate for any one officer or employee, is in excess of one year's emolument to such officer or employee, or such amount as may be specified by the Bank; and
(c) remit, either in whole or in part, the debts owed to it by any of its directors, or past directors or significant shareholders.
(4) Any loan, advance, or credit facility granted to a director, shall continue to be treated and continue to be reported as insider related until it is fully liquidated irrespective of whether such director remains on the board of the bank or not.
(5) A bank shall-
(a) not lend more than 5% of its paid-up capital to any of its directors or significant shareholders provided that the aggregate of the bank's exposure to all its directors and significant shareholders does not exceed 10% of its paid-up share capital or such percentage as the Bank may prescribe;
(b) in extending credit to any of its directors or significant shareholders, ensure that-
(i) it does so on the same terms and conditions as those prevailing at the time, for comparable transactions by the bank with persons who are not directors or shareholders of the bank,
(ii) the grant of the credit does not involve more than the normal risk of repayment or present other unfavourable features,
(iii) it follows credit appraisal procedures that are not less stringent than those applicable to comparable transactions by the bank with persons who are not directors or shareholders of the bank:
Provided that nothing in this subsection shall prohibit any extension of credit made pursuant to a benefit or compensation programme that is widely available to employees of the bank, and
(iv) it does not give preference to any director or shareholder.
(6) In this section-
“director" includes director's wife, husband, father, mother, brother, sister, son, daughter, their spouses, a company in which the director is also a director or shareholder or holds at least 5% shareholding of the company, a company whose board, or managing directors is accustomed to act in accordance with the advice, directions or instructions of the director and all other related parties as may be determined by the Bank;
"significant shareholder" means a person holding not less than 5% of the shares of the bank or such other percentage as may be prescribed by the Bank and this shall include the shareholding of a wife, husband, father, mother, brother, sister, son, daughter, their spouses and all other related parties as may be determined by the Bank;
"unsecured advances and loans" or "unsecured credit facilities", means advances, loans or credit facilities made without security, or, in respect of any advances, loans or credit facilities made with security, any part thereof which at any time exceeds the market value of the assets constituting the security or where the Bank is satisfied that there is no established market value, the value of the assets as determined on the basis of a valuation approved by the Bank.
(7) All the directors of a bank are liable jointly and severally to indemnify the bank against any loss arising from any advance, loan or credit facility granted in contravention of this section.
(8) Without prejudice to section 20 of this Act, a bank shall not, without the prior approval in writing of the Bank-
(a) engage, whether on its own account or on a commission basis, in wholesale or retail trade, including import or export trade, except in so far as may exceptionally be necessary in the course of the banking operations and services of that bank or in the course of the satisfaction of debts due to it:
Provided that nothing in this paragraph shall be construed as precluding a bank from undertaking equipment leasing business or debt factoring;
(b) acquire or hold any part of the share capital of any financial, commercial or other undertaking, except-
(i) any shareholding approved by the Bank in any company set up for the purpose of promoting the development of the money market or capital market in Nigeria or of improving the financial machinery for financing economic development or related to the normal business undertakings of non-interest banks;
(ii) any shareholding approved by the Bank under subsection (8)(b)(i), the aggregate value of which does not at any time exceed 10% of the shareholders' funds unimpaired by losses or such other limit as the Bank may prescribe; or
(iii) all shareholding acquired by a merchant bank while managing an equity issue:
Provided that the aggregate value of such acquisition does not at any time exceed the paid-up share capital of that bank or any other limit as the Bank may determine and that this paragraph does not apply to any nominee company of a bank which deals in stock and shares for, or on behalf of, the bank's customers or clients or majority interest acquired by a bank in a company while managing an equity issue;
(c) acquire or hold, either wholly or in part, the share capital of any financial, commercial or other undertaking in any foreign country:
Provided that the aggregate shareholding of a bank in foreign subsidiaries does not exceed 10% of its shareholders' funds unimpaired by losses or such other percentage as the Bank may prescribe;
(d) purchase, sell, dispose, acquire or lease any real estate for whatever purpose.
(9) Notwithstanding subsection (8) of this section, a bank may secure debt on any real or other property and, in default of repayment, may acquire such property and exercise any power of sale, as may be provided for in any instrument or by law prescribed, immediately upon such default or soon thereafter as may be deemed proper.
(10) Any director, manager or officer of a bank, specialised bank or other financial institution who fails to comply with the requirements of this section, commits an offence and is liable on conviction to imprisonment for a term of not less than three years or a fine of not less than N5,000,000 or both.
(11) Any bank which after the commencement of this Act, enters into any transaction which is inconsistent with any provision of this section is liable to a penalty of not less than N20,000,000.