CBN re-introduces merchant banking

By Omoh Gabriel
LAGOS—CENTRAL Bank of Nigeria, CBN, is set to reintroduce merchant banking in Nigeria which were phased out following the advent of universal banking in 2004. The new look merchant banks will have a minimum of N15 billion paid up capital.

A guide for merchant banking in Nigeria released by the CBN stated: “A merchant bank shall maintain a minimum paid-up share capital of N15,000,000,000 or such other amount as may be prescribed by the CBN from time to time” and must “comply with all prudential guidelines and regulations issued by the CBN on the required level of capital adequacy, liquidity and cash reserve.

It added that the bank must also “observe all applicable corporate governance standards as may be prescribed by the CBN and other financial service sector regulatory authorities in Nigeria and  design, comply with and implement an internal control framework in accordance with the standard that the CBN may prescribe from time to time.

It said that “through its Board of Directors, a merchant bank must report on the implementation and effectiveness of its internal control framework to the CBN within four months after the end of its financial year and the auditors of the merchant bank shall be required to include a statement in the annual Audit Report of the merchant bank as to the existence, adequacy and effectiveness or otherwise of such internal control systems”.

The guide provides that merchant banks are to design, comply with and implement a risk management framework which ensures that it has an appropriate reporting structure, quality, procedure and technology to effectively and adequately identify, measure, monitor and report risks.

The guideline which replaced the Minimum Standards for Merchant Banks by the CBN published on December 22, 2000 with reference number BSD/DO/CIR/VOL.1/10/2000, explained that “Universal Banking Licence” means a banking licence issued by the CBN pursuant to the Universal