HomeGeneral and News updatesCBN issues guidelines on disposal of non-permissible income

CBN issues guidelines on disposal of non-permissible income

The Central Bank of Nigerian has issued guidelines for the disposal of Non-Permissible Income (NPI) for Non-Interest Financial Institutions (NIFI).
This is according to a circular dated 13th of October, 2021, addressed to all non-interest financial institutions and signed by the  Director, Financial Policy and Regulation Department, Chibuzo Efobi.
According to the circular, “Non-Permissible Income is any income that accrues to the institution in a Shari’ah non- compliant manner, such as interest income, penalties for delayed payment of debt obligations, or any income declared by the ACE of the institution as impermissible according to the Shari’ah.”
The guideline partly reads;
“The following guideline is issued to guide the ACE of Non-Interest Banks (NIB) in supervising and monitoring the disposal of NPI by the institutions.
1. NPI is not an object of ownership of the NIB and does not confer any ownership rights on it.
2. The NPI shall be put in a dedicated NPI account and shall not be commingled with the funds of the NIB.
3. The NIB is under obligation to dispose of any NPI that accrues to it.
4. Disposing the NPI to a charitable cause is regarded as proper disposal of the NPI on the following conditions:
a. The NIB does not stand to benefit from the charitable cause in any way, even if by goodwill.
b. The charitable cause does not give benefit to any shareholder, director, ACE member or management staff of the NIB.
c. The disposal to the charity shall not be constituted nor included as part of the Corporate Social Responsibility of the NIB.
5. The disposal of the NPI directly by the NIB or through a third party is acceptable, provided it fulfils the conditions mentioned under Paragraph (4) above.
6. Whether the disposal is directly by the NIB or through a third party, the ACE shall review the disposal ex-ante and ex-post to ascertain that the conditions mentioned under Paragraph (4) above are fulfilled.
7. The ACE shall ensure that the NIB does not delay the disposal of the NPI without justifiable cause, as any unjustifiable delay shall be tantamount to the NIB deriving benefit from the prohibited NPI.
8. The ACE shall submit a quarterly report to the CBN on the disposal of the NPI
9. The ACE shall include in its annual report on the financial statements of the respective NIB a report on the disposal of the NPI
The circular noted that in line with the CBN Guidelines on Governance of Advisory Committees of Experts (ACE) for Institutions Offering Non-Interest Financial Services, it is part of the duties and responsibilities of the ACE to supervise and monitor the disposal of Non-Permissible Income (NPI) by the institution.

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