The Central Bank of Nigeria (CBN) has proposed a sweeping overhaul of the regulatory framework for Financial Holding Companies (HoldCos), including measures to strengthen operational independence of subsidiaries by prohibiting parent companies from participating in lending decisions and credit approval processes, while requiring HoldCos to maintain minimum 51% ownership stakes in subsidiaries and stricter capital requirements.
The proposed reforms, contained in the “Exposure Draft of the Revised Guidelines for Licencing and Regulation of Financial Holding Companies in Nigeria,” were aimed at strengthening governance, enhancing accountability and ensuring clearer ownership structures within Nigeria’s increasingly diversified financial groups.
The 20% capital buffer requirement will force HoldCos to raise significant paid-in capital, potentially through Rights Issues or private placements.
A November 2025 CBN directive already clarified that minimum paid-up capital equals par value of issued shares plus share premium, leaving reserves unavailable for capitalization. This compounds the new buffer requirement, creating substantial capital-raising pressure on HoldCos.
Key regulatory changes
| Reform | Requirement |
|---|---|
| Parent lending ban | HoldCo cannot participate in credit admin/approval of subsidiaries |
| Minimum ownership | HoldCos must maintain 51% stake in subsidiaries |
| Capital buffer | HoldCo capital must exceed sum of subsidiaries’ minimum capital by 20% |
| Capital recognition | Only paid-in capital counted (par value + share premium) |
| Cross-subsidization ban | Excess capital in one subsidiary cannot offset shortfall in another |
| Insider lending | No insider-related borrowings within HoldCo |
| Value-for-money audit | Biennial audit of shared services, report to CBN by March 31 |
Prohibition on parent company involvementÂ
The draft signed by Director, Financial Policy and Regulation Department, Dr. Rita Sike, stated that a HoldCo shall not “be involved in credit administration and approval processes of any of its subsidiaries.”
It added: “Loans by a banking subsidiary to its holdco would be regarded as a return of capital and deducted from the capital of the bank in computing the bank’s capital adequacy ratio.”
Beyond governance reforms, the CBN stated a HoldCo shall not “require its subsidiaries (including any employee, staff, manager, officer or director thereof) to take directives or act on the instructions of the holdco in its decision-making process, or in relation to the conduct of its business in any way whatsoever.”
Stricter capital requirements
The CBN stated: “A Holdco shall have and maintain a minimum regulatory capital which shall exceed the sum of the minimum regulatory capital of its subsidiaries by at least 20 per cent.” It added that only paid-in capital would be recognised when assessing compliance with the requirement.
The draft further clarified: “It is the capital of the holdco that is applied to the subsidiaries. Consequently, excess capital in one subsidiary shall not be used to make up a shortfall in another subsidiary.”
Implications for the Banking Industry
1. The Death of the “Shadow Board”
Historically, HoldCo boards dominated by high-net-worth promoters have exercised de facto veto power over major credit approvals at their banking arms. By completely locking HoldCos out of the credit administration pipeline, the CBN shifts 100% of the fiduciary risk—and corporate power—back to the bank’s independent credit committee. This mitigates the risk of concentration exposures directed by parent-level influence.
However, this requires stronger internal governance frameworks at subsidiary level and increases compliance burden for documenting credit decisions.
2. Increased Borrowing and Other Costs
The intra-group lending restrictions eliminate inter-company lending within HoldCo structures, reducing flexibility in liquidity management across the group. This could increase external funding needs and reduce capital efficiency, potentially increasing borrowing costs for HoldCos.
The mandate to separate technology infrastructure and prohibit shared core software platforms will trigger immediate capex requirements. Tier-1 groups that have incubated digital banking platforms, payment gateways, or fintech startups (e.g., GTCO’s Squad, Access’s Hydrogen) will be forced to untangle shared databases, data centers, and development teams. This separation will drive up IT expenses across the sector.
3. Offshore Risks Transferred Away from Depositors
Under the new guidelines, foreign subsidiaries must be owned directly by the non-operating HoldCo rather than the domestic Nigerian bank. This cleanly isolates domestic depositors’ funds from regional political, currency, or economic shocks occurring in other African jurisdictions.
Implications for the Capital Markets
1. Massive Equity Dilution Risk
As banks complete their minimum capital raises to meet the new CBN thresholds (such as FirstHoldCo’s target of ₦1 trillion paid-up capital), the parent-level HoldCos must now raise an additional standalone 20% capital buffer. Because this buffer must be funded strictly through “paid-in capital” (share capital + share premium), HoldCos will be forced to launch secondary rounds of rights issues, public offers, or private placements. This supply of fresh paper could depress industry Return on Equity (ROE) and dilute earnings per share (EPS) in the short-to-medium term.
Guaranty Trust Holding Company (GTCO) in December 2025 raised the sum of ₦10 Billion in a private placement pursuant to Section 7.1 of the Guidelines for Licensing and Regulation of Financial Holding Companies (FHCs) in Nigeria regarding the computation of the capital of FHCs.
Shareholders of Access Holdings, a tier-one Nigeria lender at an Extraordinary General Meeting (EGM) held on December 18, 2025 approved a plan to raise N40 billion in additional capital, or such other amount or their equivalent in foreign currencies, via private placement.
Shareholders of First HoldCo (parent of First Bank of Nigeria) approved a massive ₦253.1 billion capital raise at their 14th Annual General Meeting to scale the group’s paid-up capital base to ₦1 trillion. This fresh equity drive builds upon earlier successful capital raises including a heavily oversubscribed ₦150 billion rights issue and a ₦350 billion private placement.
2. Valuation Re-rating on Governance
The elimination of “double-gearing” (using the same pool of capital to back multiple subsidiaries) means HoldCo balance sheets will become highly transparent and significantly less risky. While the initial restructuring will be costly, institutional investors and global rating agencies are likely to reward Nigerian HoldCos with a “governance premium,” narrowing the historical conglomerate discount.
3. Restructured Holding Company Portfolios
To avoid the penal 20% excess capital charge on non-core or low-yield subsidiaries, several HoldCos may choose to divest or merge sub-scale non-banking assets. We can expect a wave of consolidations, buyouts, or outright spin-offs of insurance, asset management, and microfinance arms as groups optimize their capital requirements.
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