Inflation
/

CBN Warns Microfinance Banks Against Selling Forex

2 mins read

THE Central Bank of Nigeria(CBN) has issued a warning to microfinance banks against performing activities that they are not permitted to indulge in, which includes wholesale backing and foreign exchange transactions.

This was communicated in a circular titled, ‘Cessation of non-permissible activities by microfinance banks’ released on Friday by Ibrahim Tukur on behalf of CBN’s Financial Policy and Regulation Department.

The circular reads, “The Central Bank of Nigeria has observed the activities of some microfinance banks that have gone beyond the remit of their operating licence by engaging in non-permissible activities, especially wholesale backing, foreign exchange transactions and others.

“Given the comparatively low capitalisation of MfBs, dealing in wholesale and/or foreign exchange transactions are a significant risk with dire consequences for financial system stability.”

READ ALSO  22-year-old Corp Member Arrested For Drug Trafficking In Abuja

The bank said it had become imperative to remind all microfinance banks to strictly adhere to the extant Revised Regulatory and Supervisory Guidelines for Microfinance Banks in Nigeria 2012.

It said, “For the avoidance of doubt and consistent with the permissible activities of specialised micro-institutions: Microfinance Banks are strictly prohibited from foreign exchange transactions.

“Microfinance Banks are to primarily focus on providing financial services to retail and/or micro-clients with a limitation of N500,000 per transaction for Tier 2 Unit Microfinance banks and N1m for other categories.”

The circular stated that microcredit facilities would constitute 80% of total loans portfolio for Microfinance banks.

READ ALSO  FG, IOM repatriate 162 Nigerian irregular migrants, trafficked victims from Libya

CBN warned that activities of the microfinance banks would continue to be monitored and would apply stringent regulatory sanctions for violations of extant regulations, including revoking licences.

+ posts