The implementation of Nigeria’s new financial services legislative framework known as the Banks and Other Financial Institutions Act (BOFIA) is a tool that has the capacity to tackle systemic risks in the financial sector, financial experts have said.
According to them, the Banks and Other Financial Institutions Act 2020, is an enhanced regulation that offers an improvement that can transform the country’s financial sector and a step forward.
The financial experts, who spoke during a virtual conversation organised by Global South Dialogue on Economic Crime in collaboration with the Commercial Law Research Network Nigeria and the University of Reading, said there is a need to continue putting an effective regulatory framework in place for the banking and financial sector in Nigeria.
Speaking on the theme, ‘The Practitioners’ Perspective on the Banks and Other Financial Institutions Act, 2020,’ Ajibola Asolo, partner, Aluko & Oyebode, said the framework of Central Counterparty Resolution in Nigeria ensures the performance of open contracts, reduces counter-party credit risks and enhances regulatory transparency.
Konyin Ajayi, the partner, Olaniwun Ajayi LP, said prudential regulation, reduction of systemic risk, and a system-wide support-based mechanism are indispensable in upholding the standards and pillars of bank supervision.
He said that the Act has brought about systemic changes that take into consideration both domestic and international shifts with the aim of forestalling bank failure.
Ajayi described BOFIA as a tool for recognising the role of core regulators like the Securities and Exchange Commission (SEC), and the Central Bank of Nigeria (CBN).
Bolanle Adebola, associate professor at the University of Reading, said the development of an effective regulatory framework for the banking and financial sector in Nigeria needs to be continued.
On the practical implications of BOFIA on the country’s capital market, Babatunde Ajibade, managing partner, SPA Ajibade, said that BOFIA 2020 is critical to Nigeria’s capital market because banks make up the preponderance of institutions listed on the market.
According to him, BOFIA introduces a necessary and much-needed regime of change into the financial industry.
“It however ascribes extensive power to the Central Bank of Nigeria without making any provisions to ensure that the power is not misused, abused, or used arbitrarily in a manner that will bring more harm than good to the financial sector that it is meant to strengthen,” he said.
Anthony Idigbe, senior partner, Punuka Solicitors, and Attorneys, said that shifting the burden to resolve the financial distress of banks to CBN alone is wrong and that the judiciary has to play a decisive role in ensuring that the CBN takes due process.