On June 10, 2026, the Central Bank of Nigeria [CBN] signed off on a new draft guideline: the Guidelines on Ring-Fencing Operations of Closely Linked Entities in the Nigerian Financial System (circular FPR/DIR/PUB/CIR/001/016). The purpose of this guideline is to further regulate the relationship between intra-connected banks to help increase customer protection.
This guideline if passed and enforced affects everyone that builds, works, or invests in a fintech. It directly targets the kind of group structures a lot of Nigerian FinTechs are either part of, or quietly dependent on.
Understanding The Guideline: Guidelines on Ring-Fencing Operations of Closely Linked Entities in the Nigerian Financial System.
On the face of the guideline, CBN spells out four [4] objectives up front:
- To stop groups from blending different licence types to dodge the rules that should apply to each one (what it calls “regulatory arbitrage”);
- To stop customer funds from getting mixed up with a related entity’s funds;
- To increase governance requirements specifically for closely linked entities;
- To simplify the winding up of a distressed entity in an orderly way, without dragging the rest of the group down with it.
The guideline draft defines a ‘closely linked entity’ as:
“An entity that directly or indirectly controls, is controlled by, or is under common control with another entity; or over which significant influence is exercised through ownership, voting rights, common director/senior management, shared systems/branding, or contractual dependence”.
It is important to note that by definition, this guideline covers FinTechs that are not formally part of a bank group but lean heavily on one bank for core infrastructure; settlement, card issuing, a sponsor-bank arrangement, a banking-as-a-service [BaaS] setup.
We have simplified the guidelines for effectively understanding as follows:
1. Stand on your own two feet (governance)
This CBN guideline expects each entity to have its own dedicated board and its own risk-management framework. The guideline states specifically that: ‘the numbers of directors on the Board of an entity permitted to serve as directors in its closely linked entity shall not exceed 20 per cent [20%] of the total number of directors’.
2. No casual lending between group entities
Without CBN’s prior written approval, one closely linked entity cannot lend to, or guarantee the obligations of, another. Therefore, where transactions happen between linked entities, they must have normal commercial terms, fully documented, and reported to CBN every quarter. Each entity also has to meet capital adequacy and liquidity standards on its own,
regardless of how well-resourced the wider group is, and any liquidity support flowing between linked entities needs CBN’s written approval first.
3. Customer money stays customer money
This means that each entity’s accounts must be kept fully separate from a linked entity’s, reconciled daily, and any discrepancy ought to be fixed within 24 hours. Entities are also expected to run automated, real-time monitoring specifically watching for transfers or commingling that might slip through shared IT infrastructure.
It is also pertinent to note that customer funds cannot be used for intra-group lending, securing group obligations, servicing group debt, proprietary trading, collateral for external borrowing, or covering an affiliate’s operating expenses.
4. One sign-up doesn’t open every door
A customer still has the right to use a product from a closely linked entity, however, the closely linked entity has to properly onboard them by opening an actual account or wallet, pull KYC[1] directly from the customer (or from another source, with the customer’s consent), and give a clear, plain-language disclosure of which entity is actually providing the service, including any alternative option that exists.
5. No back-door services through shared tech
An entity cannot use its IT systems to offer services it is not licensed for, even if a sister entity in the group is licensed for that exact service. An entity cannot also process transactions on behalf of a linked entity through its own systems either. Shared technology and shared services can still exist, but only under a formal service-level agreement covering scope, roles, and arm’s-length pricing, with exit and substitution clauses, board oversight, a register CBN can inspect, and an annual independent value-for-money audit due to CBN by May 31 every year. And critically: CBN’s prior written approval is needed before the shared arrangement can even start.
6. Partnerships now need CBN’s blessing
Any partnership agreement between a regulated entity and a closely linked one now needs CBN’s prior written approval before it is signed. The agreement has to spell out risk-sharing, dispute resolution, data protection, and exit terms clearly, can’t expose the regulated entity’s customers to risk from the partnership, and has to sit in a register CBN can check at any time. If your fintech runs on a BaaS [Bank as a Service] deal [2], a sponsor-bank arrangement, or a distribution partnership with a bank, this is the clause that turns that relationship from a private commercial contract into something the regulator now has a direct say in.
CBN has stated plainly that non-compliance can attract penalties, replacement of management, or licence revocation, in line with the Banks and Other Financial Institutions Act (BOFIA) 2020.
In Conclusion, this is still a draft, and the wording may change before it’s locked in. But the direction is unmistakable: CBN wants every licensed entity, fintech included, to be able to stand on its own.
TEAM VERNIA
[1] Know Your Customer [KYC]
[2] “BaaS,” or “banking as a service,” is a business model where licensed banks allow their data and digital services to be integrated, via APIs, into the products of other types of businesses. That allows those businesses to offer banking services without needing financial regulation and oversight.
