The Central Bank of Nigeria (CBN) has drawn a hard line under one of the more contentious grey areas in the country’s bank resolution framework, telling lenders and their counterparties that certain contractual freezes triggered during a bank rescue can now last no longer than two business days.
The clarification landed in a circular dated July 1, 2026, and signed by Okey Umeano, acting director of the apex bank’s Financial Markets Department. On its face, it is a technical footnote to a four-year-old law. In practice, it closes a loophole that had quietly worried treasurers, derivatives desks, and cross-border counterparties doing business with Nigerian banks.
Sections 34(2)(b) and 40(2) of the Banks and Other Financial Institutions Act (BOFIA), 2020, sit at the heart of Nigeria’s bank resolution architecture. Section 34(2)(b) gives the CBN power to facilitate the acquisition of a failing bank by another institution as part of efforts to preserve financial stability. In contrast, Section 40(2) allows the governor once a license has been revoked. The public interest requires it to direct resolution actions, including the temporary suspension of counterparties’ rights to terminate contracts.
The CBN said the absence of a defined maximum duration for exercising its powers under those sections had created uncertainty for counterparties dealing with Nigerian banks and other financial institutions in respect of financial contracts, and the regulator added that this uncertainty had the potential to impede the effective management of commercial risk (bank-speak for “nobody transacting with a Nigerian institution could confidently price the risk of getting frozen out indefinitely if that institution stumbled”).
The circular now puts a firm ceiling on both types of freeze. Any suspension of a payment or delivery obligation under an “Affected Contract” tied to a failing bank under Section 34(2)(b), and any suspension of a termination right under Section 40(2) in relation to an institution that is subject to or a proposed subject of a resolution measure, shall not exceed a period of two business days, commencing from the date on which the written order or notice of suspension is issued by the CBN Governor.
The two-day clock, in other words, starts ticking the moment the governor puts pen to paper, not from whenever a counterparty happens to find out about it and not tied to the broader resolution timeline, which can run for weeks or months.
The guidance defines its scope broadly: it covers all banks, other financial institutions, and their counterparties to what the CBN calls “Affected Contracts”: any contract to which a bank or financial institution is a party that falls within the scope of Sections 34(2)(b) or 40(2) of BOFIA.
That sweeps in a wide range of everyday banking arrangements, payment obligations, delivery obligations under trading contracts, and termination clauses in financial agreements precisely the instruments that counterparties rely on to manage exposure to a wobbling institution.
The circular was issued pursuant to the powers granted to the CBN Governor under Section 56 of BOFIA and Section 33(1)(b) of the Central Bank of Nigeria Act, 2007, and took immediate effect from July 1. There is no phase-in period and no carve-out for contracts already in force; the two-day ceiling applies from day one.
The circular arrived the same week the apex bank revoked the licenses of 46 inactive, insolvent, or non-operational microfinance banks, citing its powers under BOFIA, a mass clean-up that, while unrelated to any single large-bank resolution, put the CBN’s BOFIA toolkit squarely back in the spotlight and likely sharpened market appetite for clarity on how those powers would be exercised in a more systemically significant case.
It also follows a broader pattern this year of the CBN tightening the screws on financial-system discipline. Earlier in 2026, the regulator directed banks to cut off large-ticket borrowers with non-performing loans flagged in the Credit Risk Management System or by licensed private credit bureaus from accessing further credit, with restrictions aimed specifically at obligors whose exposure across the banking system exceeds the Single Obligor Limit and whose distress could threaten a bank’s capital adequacy.
Taken together, the two moves point in the same direction: an apex bank trying to signal to domestic lenders, to non-performing borrowers, and now to global counterparties that Nigeria’s post-BOFIA resolution regime has both teeth and guardrails.
The credit-discipline directive tightens the screws on the input side (who gets funded); this week’s circular tightens the screws on the output side (how long a bank in trouble can leave counterparties hanging).
For banks, asset managers, and trading counterparties with exposure to Nigerian financial institutions, the practical effect is straightforward: if a CBN-ordered resolution measure freezes payments, deliveries, or termination rights, that freeze cannot run past two business days from the date of the governor’s order.
Whether that proves generous or tight will likely only be tested the next time a systemically significant Nigerian bank actually lands in resolution, but for now, the CBN has swapped an open-ended discretionary power for a bright-line rule, precisely the kind of certainty international counterparties tend to price favorably.
WHAT YOU SHOULD KNOW
The CBN has replaced open-ended discretion with a hard deadline. Where a Nigerian bank fails or enters resolution, any freeze on payments, deliveries, or contract termination rights under BOFIA Sections 34(2)(b) and 40(2) can now last no more than two business days from the date the governor issues the suspension order, effective immediately as of July 1, 2026.
This removes a long-standing gap that left counterparties unable to gauge how long they could be locked out of a distressed institution, and it signals a broader push by the CBN this year to make Nigeria’s bank resolution and credit-risk framework more predictable and rule-based, rather than discretionary.
