The CBN Prudential Guidelines for Deposit Money Banks in Nigeria, 2010 also regulates investment and merchant banks in Nigeria.
The Securities and Exchange Commission also has oversight and regulatory purview over investment banks in Nigeria, to the extent that it relates to their capital market activities.
The BOFIA provides for the activities permitted and not permitted for merchant and investment banks in Nigeria.
Merchant banking licence
This licence allows financial institutions to provide professional services like wholesale banking or investment banking services as set out in guidelines made under the CBN Scope, Conditions and Minimum Standards for Merchant Banks Regulations No. 02, 2010.
Merchant bank licencing by CBN requires minimum paid up capital of N15 billion or any other prescribed amount.
The merchant banks also require approval by Security and Exchange Commission to operate in the capital market.
Read also: Importance of Investment Banks in Economic Development of Nigeria
Permissible (Permitted) Activities of Merchant and investment banks in Nigeria
Activities permitted by a merchant banking licence include:
• taking deposits from any natural or legal person of at least NGN100 million per tranche, or such other minimum amount prescribed by the CBN;
• providing finance and credit facilities to non-retail customers;
• dealing in foreign exchange and provide foreign exchange services, subject to the requirements of the Foreign Exchange (Monitoring & Miscellaneous Provisions, etc) Act and CBN Regulations made under it.
• acting as issuing house, or managing, arranging or coordinating the issuance of securities, subject to the provisions of BOFIA. Certificate of Registration as a Capital Market Operator is issued merchant banks by the Securities and Exchange Commission (SEC) and permits them to operate in the Nigerian capital market and carry on investments and securities business in Nigeria. Bank licensed as a commercial bank cannot be registered as a capital market operator
• providing underwriting services for issuance of securities, subject to the provisions of BOFIA and to prior notification in writing to the CBN
• providing treasury management services including money market, fixed income and foreign exchange investment on behalf of clients;
• providing financial, consultancy and advisory services relating to corporate and investment matters;
• providing asset management services, including fund and portfolio management services, act as a dealer of securities for its own account, and for clients, or otherwise make or manage investments on behalf of clients;
• engaging in proprietary trading, such as investing in debt instruments, equity or hybrid-equity instruments, subject to the provisions of BOFIA and CBN rules, and guidelines;
• trading in fixed income securities, where duly licensed;
• providing custodial services;
• issuing, discount and rediscount negotiable instruments;
• providing debt factoring services;
• any other activities prescribed in writing by the CBN.
Nonpermissible (Prohibited) Activities of Merchant and investment banks in Nigeria
- Merchant or investment banks are permitted to take deposits and maintain accounts from natural and legal persons, but must not be classified into savings and current accounts and the deposits must not be less than N100 million.
- provision of retail banking services,
- Honouring of withdrawal and overdraft anytime requested
- Merchant and investment banks are not permitted to carry out agency banking and mobile money operations.
- Does not issue ATM cards and deploy ATM