FREE ZONE BANKING GUIDELINES

The Central Bank of Nigeria has come out with guidelines for establishing banks in Nigerian export free zones.
Under the guidelines, the minimum capital requirement for export free zone  banking in Nigeria is $10m and proof of its payment to the CBN must accompany formal application for such banking license.
Apart from proof of minimum capital requirement, the application, must be accompanied by a formal letter of application and none refundable fee of ten thousand dollars plus a number of other documents.
A number of incentives have also been put in place to make free zone banking attractive include freedom to move finds in and out of the zone; exemption from stamp duties, exemption from deducting withholding tax on interest and exemption from paying capital gains tax.
Other incentives include exemption from payment of customs duty on furniture, office equipment and other needed facilities and exemption from paying value added tax.
Banks that operate in export free zones  will be allowed to take deposits and maintain accounts, and can engage in retail banking; grant loans and deal in foreign exchange.
They are also allowed to offer treasury management services, custodial services, and financial advisory services.
They are also allowed to invest in non convertible instruments and undertake fixed income trading in addition to none interest banking and other services the CBN may approve from time to time.
However, they are prohibited from sourcing for foreign exchange from the official market of the Nigerian customs territory; opening accounts for customers in contravention of know your customers principle and from insurance underwriting.
They are also prohibited from loss adjusting insurance, asset management, issuing house operations and capital market underwriting.
They are not allowed to invest in equity or hybrid equity instruments save and except for investments under BOFA, and they too must not undertake any transaction that is inimical to the free zone.