CBN may Sanction Microfinance Banks for illegal Forex Trading – The Central Bank of Nigeria (CBN) has threatened to sanction and revoke the licences of microfinance banks found to be engaged in foreign exchange (forex) trade and other non-permissible activities.
The apex bank in a circular issued on Friday reminded the banks that their primary mandate is to provide financial services to retail businesses, warning that they are prohibited from forex transaction.
The circular signed by Ibrahim Tukur on behalf of CBN’s Financial Policy and Regulation Department is entitled ‘Cessation of non-permissible activities by microfinance banks’.
The financial regulator directed all MfBs to strictly comply with the extant Revised Regulatory and Supervisory Guidelines for Microfinance Banks in Nigeria 2012.
It read, “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.”
It said, “For the avoidance of doubt and consistent with the permissible activities of specialised micro-institutions: MfBs are strictly prohibited from foreign exchange transactions.
“MfBs 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 MFBs and N1m for other categories.”
According to the circular, microcredit facilities shall constitute a minimum of 80 per cent of total loans portfolio for MfBs.