CBN orders Microfinance Banks to stop forex transactions

The Central Bank of Nigeria (CBN) in a circular titled ‘Cessation of Non-Permissible Activities by Microfinance Banks’ has cautioned microfinance banks in the country to stop engaging in foreign exchange transactions and other unauthorised dealings.

According to apex bank, “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).”

Based on the remit of microfinance banks, they are strictly prohibited from foreign exchange transactions, according to the CBN.

Consequently, microfinance banks that deal in forex transactions risk sanctions.

Microfinance banks are meant to focus primarily on providing financial services to retail and micro-clients.

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