Written by Sarah NEGEDU

Free Trade Zones: CBN unveils guideline for banks operation

Nigeria’s apex bank, the Central Bank of Nigeria has exempted all banks operating in free trade zones in the country from stamp duties on all its documents, withholding tax deductions on interest payable on deposits, dividends and royalties as well as corporate and capital gains taxes.

In a recent guideline for banking operations in the free trade zones in Nigeria, the apex bank said banks operating in the zones will also enjoy the benefit of being exempted from import duties on furniture, office equipment and other facilities necessary for its operations as well as Value Added Tax.

The banks will also have the freedom to move funds in and out of the zone on all eligible transactions as well as “any other incentives as may be approved by the authority, from time to time” according to the guideline.

The guideline states that “As from the commencement of these guidelines, only banks or financial holding companies licensed under BOFIA, or licensed foreign banks shall qualify to apply to the Authority for approval to establish presence to carry on banking business in Nigeria’s FZs.

“The banks currently operating in the FZ before the issuance of these Guidelines shall, from the commencement of these Guidelines, regularize and comply with the provisions for establishing presence in the FZ. This should be done within six months of issuance of the guideline.”

The CBN also set a minimum paid up capital of $10 million (about N2 billion) for any bank which want to operate in the free trade zone having paid a $20,000 license fee and received approval from the apex bank.

The free trade zone banks are however prohibited from sourcing foreign exchange from the official foreign exchange market of the country, insurance underwriting or opening an account for a customer in contravention of the Know-Your-Customer (KYC) principles.‎

“The following banking and related activities are prohibited in the FZs- sourcing foreign exchange from the official foreign exchange market of the Nigeria Customs Territory; opening an account for a customer in contravention of the Know-Your-Customer (KYC) principles; insurance underwriting; Loss adjusting, Re-insurance, Asset Management, Issuing House and Capital Market underwriting services; investment in equity or hybrid-equity instruments, save and except for the investments permissible under BOFIA.” 

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