CBN warns microfinance banks to stop forex trading

The Central Bank of Nigeria (CBN) has warned microfinance banks to stop operating beyond the limits of their licenses.

The apex bank said in a circular issued on Thursday, August 19, 2021 that the banks have been observed to be engaging in non-permissible activities.

CBN listed wholesale banking, and foreign exchange transactions as two of the prohibited things the banks are engaging in.

The bank said microfinance banks are prohibited from such activities due to their comparatively low capitalisation.

"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 2021 (the Guidelines)," the circular read.

The CBN said the microfinance banks should focus primarily on providing financial services to retail and micro-clients only, limited to N500,000 per transaction for Tier 2 unit microfinance banks, and N1 million for other categories.

"Micro credit facilities shall constitute a minimum of 80% of total loans portfolio for MFBs," CBN said.

The apex bank said it will continue to monitor developments and apply severe regulatory sanctions for breaches of the guidelines, including revocation of licence.