CBN Bans Microfinance Banks from FX Transactions, Others [Download Circular]

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The Central bank of Nigeria (CBN) has banned Microfinance Banks from engaging in what it referred to as non-permissible activities, to wit; wholesale banking, foreign exchange transactions and others.

In a circular dated August 19, 2021 signed by Ibrahim Tukur, the Apex Bank directed MFBs to restrict itself to permissible activities of specialized micro institutions.

According to the circular, “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. 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)”

“For the avoidance of doubt and consistent with the permissible activities of specialized  micro institutions:

  1. MFBs are strictly prohibited from foreign exchange transactions.
  2. MFBs are to primarily focus on providing financial services to retail and/or micro- clients.
  3. Micro credit and retail transactions carried out by MFBs are limited to WS00,000 per transaction for Tier 2 Unit MFBs and W 1,000,000 for other categories.
  4. Micro credit facilities shall constitute a minimum of 80 per cent of total loans portfolio for MFBs.

Download Circular

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