By Chioma Obinagwam
Nigeria’s apex bank, the Central Bank of Nigeria (CBN) has reiterated that Microfinance Banks (MFBs) are not allowed to engage in Foreign Exchange (Forex) Transactions.
Confiance News gathered from the Facebook page of CBN on Friday.
“The Central Bank of Nigeria (CBN) observed the activities of some Microfinance Banks (MFBs) that have gone beyond the remit of their operating licenses by engaging in non-permissible activities especially wholesale banking, foreign exchange transactions and others.
“For the avoidance of doubt and consistent with the permissible activities of specialized micro-institutions:
1. MFBs are strictly prohibited from foreign exchange transactions,” the statement disclosed in part.
The CBN noted that the warning was necessary given the comparatively low capitalization of MFBs, dealing in wholesale and/or foreign exchange transactions are a significant risk with dire consequences for financial system stability.
Read also: CBN to get tough on customers, banks contravening new Forex policy
“It has therefore become imperative to remind all MFBs to strictly comply with the extant Revised Regulatory and Supervisory Guidelines for Microfinance Banks in Nigeria 2012 (the Guidelines),” the apex bank said.
CBN noted that MFBs are to primarily focus on providing financial services to retail and/or micro-clients.
The apex bank also stated that Micro credit and retail transactions carried out by MFBs are limited to N500,000 per transaction for Tier 2 Unit MFBs and N 1,000,000 for other categories.
It added that micro credit facilities shall constitute a minimum of 80 percent of total loans portfolio for MFBs.
“The CBN will 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),” CBN warned.
Confiance News recalls that the admonishment is coming barely one week after the apex bank warned that it would wield the big stick on those who contravene the new Forex policy.
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