The Central Bank of Nigeria (CBN) has issued an exposure draft revising its guidelines for Financial Holding Companies (FHCs), aiming to address identified gaps in compliance, overhead inflation, and governance practices since the original rules were introduced in August 2014.

The draft, dated June 10, 2026, and open for public comments until July 9, 2026, seeks to clarify the roles and responsibilities within FHC structures, particularly concerning the relationship between parent companies and their subsidiaries.

A Financial Holding Company is defined as a non-operating parent company owning stakes in at least two financial services subsidiaries, at least one of which must be a bank. Its primary function is to hold shares and provide strategic direction, not to engage in direct trading or customer service.

Structural and Capital Reforms

A significant proposed change mandates that FHCs must maintain minimum regulatory capital exceeding the combined minimum regulatory capital of all their subsidiaries by at least 20%. Crucially, only paid-in capital counts towards this buffer, excluding retained earnings.

This rule, detailed in Section 7.1 of the draft, could pose a challenge for groups with multiple licensed subsidiaries, as excess capital in one entity cannot offset a shortfall in another, effectively trapping capital at the entity level.

Another key reform addresses foreign subsidiaries. The draft stipulates that these must be held directly by the FHC or an intermediate holdco, with a maximum of two hierarchies permitted for offshore holdings, requiring exceptional CBN approval beyond that. This aims to ring-fence the Nigerian bank's capital from international expansion risks.

Groups like Access Holdings, with extensive Pan-African operations, will need to review their offshore ownership structures to ensure compliance. This restructuring may involve significant transition costs, regulatory approvals in multiple jurisdictions, and potential tax implications.

Ownership and Operational Restrictions

The draft also introduces a 51% ownership floor for subsidiaries under Section 2.1(xi). FHCs with minority stakes in pension or insurance subsidiaries will face a choice: increase their ownership to 51% or divest within a 6-month period, as stipulated in Section 5.2(iv).

This provision is expected to trigger a wave of mergers and acquisitions as FHCs either buy out minority shareholders or sell off non-core assets. The CBN's move is seen by some as an M&A pipeline announcement disguised as prudential regulation.

Furthermore, the rules tighten the regime for shared services. Permissible services are now confined to facilities, legal, and ICT, requiring prior written CBN approval. These services must be priced at arm's length, with board consent from both entities, and are subject to a value-for-money audit every two years.

The CBN is explicitly limiting the ways FHCs can extract value from subsidiaries, moving away from creative intercompany charging towards a model where FHCs primarily operate on dividends.

Intra-group lending provisions in Section 7.8 also carry significant capital implications. Loans from a banking subsidiary to its FHC will be treated as a return of capital, deducted from the bank's capital adequacy. Lending to fellow subsidiaries will attract a 100% risk weight, even if secured, and will be deducted from capital if unsecured. This effectively curtails the FHC's ability to use its bank as a borrowing vehicle.

Governance Adjustments

The draft proposes governance tightening, including an interlocking directorship cap of one subsidiary board per FHC director and a 20% ceiling on FHC directors serving on any subsidiary board. This will necessitate board reshuffles across the sector.

Prohibitions on subsidiary management attending FHC board meetings and explicit bans on the FHC involving itself in credit approval are designed to prevent the blurring of operational lines and direct management interference.

For new entrants, the licensing economics present a high hurdle, with a N20 million application fee, a N100 million final licence fee, and a requirement for non-bank promoters to deposit 100% of the FHC's minimum capital with the CBN before approval in principle. The 5-year lock-in period for FHC structures also limits structural flexibility.