By Chioma Iruke
Central Bank of Nigeria (CBN) has barred microfinance banks from foreign exchange transactions, a circular reads.
In the circular to all microfinance banks dated August 19, 2021, and titled “Cessation of non-permissible activities by microfinance banks”, the apex bank said no microfinance bank should henceforth indulge in forex transactions.
The circular was signed by Ibrahim Tukur for the Financial Policy and Regulation Department, CBN.
“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 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),” it read.
The CBN further warned that defaulting microfinance banks risk losing their licenses.