The Bank Directors Association of Nigeria (BDAN) has urged Banks and Financial institutions to treat regulatory compliance must as a baseline rather than an ultimate objective.
The advisory comes in the wake of recent enforcement actions by the Central Bank of Nigeria (CBN) targeting insider credit abuses, which have reportedly forced several bank owners and directors out of the system.
According to the association in its latest newsletter, while extending credit to connected individuals is not inherently a governance failure, it becomes a critical vulnerability when personal influence overrides commercial judgment, independent risk assessment, and standard credit discipline.
BDAN noted that when lending decisions are shaped by relationships rather than creditworthiness, institutions risk accumulating heavy exposures, weak repayment discipline, and inadequate collateral.
The association noted that beyond immediate financial threats, such practices erode public confidence and stakeholder trust in the governance framework of the banking sector.
To safeguard institutional resilience, the association underscored that a board’s duty extends far beyond verifying standard approvals. Directors are required to actively manage conflicts of interest, ensure rigorous independent scrutiny of related-party facilities, and maintain the courage to challenge proposals that fail to meet credit standards, regardless of the applicant’s status or influence.
The association also stressed that internal audit, compliance, and risk management functions must operate with absolute independence and authority. Boards have been urged to foster an organizational culture where difficult questions are welcomed, incomplete reporting is rejected, and management is held strictly accountable for corrective actions.
It also maintained that while Nigerian banks have made significant strides in bolstering capital adequacy and financial strength, robust governance remains the ultimate shield against avoidable risks, ensuring long-term financial stability and sustainable growth across the sector.
