The Central Bank of Nigeria has warned Microfinance banks to stop engaging in foreign exchange transactions and other unauthorised dealings.
In a circular titled ‘Cessation of Non-Permissible Activities by Microfinance Banks’ issued by Ibrahim Tukur from CBN’s Financial Policy and Regulation Department, the bank said the remit of microfinance banks prohibits them from foreign exchange transactions.
It was noted that micro-credit and retail transactions carried out by MFBs are limited to N500,000 per transaction for Tier 2 Unit, and N1,000,000 for other categories.
The CBN emphasized that microfinance banks that deal in forex transactions risk sanctions.
“The Central Bank of Nigeria (CBN) has 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.
“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.
“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 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).”