CBN Caps Troubled Bank Payment Suspensions at Two Business Days

By Breaking News Nigeria On Jul 1, 2026

By Samuel Akpan

To eliminate market uncertainty and boost commercial risk management, the Central Bank of Nigeria (CBN) has implemented a strict two-business-day limit on halting payment obligations and contract termination rights for troubled financial institutions.

The new mandate, detailed in a July 1 circular to the industry, provides critical clarity on Sections 34(2)(b) and 40(2) of the Banks and Other Financial Institutions Act (BOFIA) 2020.

Section 34(2)(b) empowers the CBN governor to suspend payment or delivery obligations under contracts to which a failing bank is a party, while Section 40(2) allows the temporary suspension of counterparties’ rights to terminate certain financial contracts when a bank is under resolution.Previously, the absence of any defined time limit for these powers had created uncertainty among counterparties dealing with Nigerian banks and risked undermining effective commercial risk management during bank interventions.

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The new rule makes clear that any suspension must be short-lived.

“The suspension of any payment or delivery obligation under an Affected Contract, pursuant to Section 34(2)(b) of the BOFIA, in relation to a failing bank or other financial institution; and the exercise of any termination right under an Affected Contract to which Section 40(1) of the BOFIA applies, pursuant to Section 40(2) of the BOFIA in relation to a Classified as Confidential bank or other financial institution that is a subject or 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 circular reads.

The directive applies to all “affected contracts” — that is, any contracts involving a bank or other financial institution that fall within the scope of Sections 34(2)(b) or 40(2) of BOFIA.

The circular, issued pursuant to the CBN’s powers under BOFIA and related legislation, takes immediate effect.

Persecondnews reports that the the Banks and Other Financial Institutions Act (BOFIA) 2020 represents a major overhaul of Nigeria’s banking regulatory architecture.

It replaced the 1991 Act (as amended) and introduced a more proactive, modern resolution regime for distressed and failing banks.

The goal is to protect depositors, maintain financial stability, minimise systemic contagion, and give the Central Bank of Nigeria (CBN) flexible tools to intervene early — rather than waiting for full insolvency or liquidation.

BOFIA 2020 prioritises prevention and orderly resolution over immediate liquidation.

It positions the CBN as the primary resolution authority for banks, reducing the earlier heavy reliance on the Nigeria Deposit Insurance Corporation (NDIC) for initial takeover.

The CBN can now act decisively when a bank shows signs of distress (Section 34(1) triggers), before handing a revoked licence to the NDIC for liquidation where necessary.