Microfinance banks that trade in dollars, pound sterling, euro, and any other foreign currencies will lose their operating licence, the Central Bank of Nigeria (CBN) has threatened.
The threat is a continuous move by the apex bank to sanitise the forex market which had been abused severally.
In a circular warning all MFBs in Nigeria and signed by Ibrahim Tukur of the CBN’s financial and regulation department stated that the banks had been operating beyond their operating licenses.
The latest warning came a few days after the apex bank froze the accounts of six online investment companies for illegally sourcing forex in Nigeria to finance their foreign deals and stocks (https://infomediang.com/implications-6-fintech-online-investment-account-frozen-by-cbn )
CBN says microfinance banks do not have the power to engage in wholesale banking, and foreign exchange transactions among others, warning that activities pose danger to Nigeria’s financial system.
Specifically, Tukur called the attention of the MFBs to CBN’s Revised Regulatory and Supervisory Guidelines for Microfinance Banks in Nigeria 2012.
Some of the roles of MFBs, according to CBN include:
1) To primarily focus on providing financial services to retail and or micro- clients
2) Micro-credit facilities of the MFBs shall constitute a minimum of 80 percent of the total loans portfolio.
3) Credit and retail transactions carried out by MFBs are limited to N500,000 per transaction for Tier 2 Unit MFBs and N1,000,000 for other categories.
4) Prohibition from deals in foreign exchange transactions unless they want their licence revoked
Moving forward, CBN promised to “continue to monitor developments in the MFB sector and apply severe regulatory sanctions for breaches of extant regulations, including revoking the license of non-compliant MFBs (in line with Section 19 of the Guidelines).”
The latest warning is a follow-up to the July 27, 2021, decision of the CBN to stop the sales of FX to Bureau De Change operators, accusing them of being agents of corruption to those who launder money.
Since then, CBN has been channeling weekly allocations of dollar sales to commercial banks to meet demands for PTA, BTA, foreign medicals, and foreign school fees payment.