THE BOFIA

Introduction:

The?Banks and Other Financial Institutions Act (BOFIA)?in Nigeria is a crucial piece of legislation that regulates banking operations and the activities of other financial institutions. This article seeks to highlight some key provisions of the activities for easy understanding:

A. Functions, Powers, and Duties of the Central Bank of Nigeria (CBN):

The Central Bank of Nigeria plays a central role in overseeing the financial services industry, maintaining monetary stability, promoting a sound financial system, and ensuring the stability of the Nigerian currency among others.

B. Banking Business:

The Act prohibits anyone from carrying on banking business in Nigeria without a valid license issued by the CBN after such a company has fully acquired a legal status through incorporation in Nigeria.

C. Application for Grant of License:

Entities seeking to operate as banks or financial institutions must apply to the CBN for a license after it has been incorporated by Corporate Affairs Commission of Nigeria. The Act has mandated the CBN to evaluate applications based on various criteria, such as financial strength, management competence, and compliance with regulatory requirements.

D. Minimum Paid-Up Share Capital:

Before a Banking license can be granted to any institution they must meet a prescribed minimum paid-up share capital requirement to obtain and maintain their licenses.

E. Banking operations by Foreign corporations in Nigeria:

For a foreign bank to carry out Banking operations in Nigeria such a company must have registered as a legal entity in Nigeria and must have been granted Banking license by the CBN and they must comply with the minimum paid-up share capital requirement under the Act.

F. Shareholder Rights:

Shareholders’ voting rights are proportional to their shareholding in a bank.

Legal proceedings related to shares held in another’s name are restricted.

J. Penalties and Regulatory Breaches:

The Act prescribes penalties for non-compliance which provides that any person or entity that transacts banking business without a valid license under the BOFIA is guilty of an offense and the penalty for this includes imprisonment for a term not exceeding 10 years or a fine of up to N2,000,000 or both fine and penalty.

This is aimed at ensuring adherence to regulatory standards and protecting the stability of the financial system.

In summary, the BOFIA serves to regulate financial institutions, enhance efficiency, and maintain stability in Nigeria’s financial sector