MICROCAPITAL BRIEF: Microfinance Banks Ask Central Bank of Nigeria for Six More Months to Meet Tightened Licensing Requirements

Microfinance banks in Nigeria have entered negotiations with the Central Bank of Nigeria (CBN) to extend by six months their grace period to operate with provisional licenses [1]. In October 2010, CBN issued such licenses to 121 microfinance banks to resume operations after having taken austerity measures [2], including securing new capital and reinforcing their loan recovery procedures. Their operating licenses has been revoked by CBN the previous month on the grounds of, inter alia, poor operational management and high levels of non-performing loans [3]. The provincial licenses stipulate that the 121 microfinance banks must recapitalize to a minimum of NGN 20 million (USD 131,000) by January 25, 2011, or have their licenses finally withdrawn. There is no indication that the January deadline has so far been enforced.

By: Jacqueline Foelster, Research Associate

About Central Bank of Nigeria (CBN): Central Bank of Nigeria (CBN), established in 1958, is Nigeria’s central banking authority. As defined by the 1958 Act of Parliament that created CBN, its statutory mandates are as follows: “to issue legal tender currency; to maintain external reserves; to safeguard the international value of the legal tender currency; to promote monetary stability and a sound financial system in Nigeria; and to act as banker and financial adviser to the Federal Government.” As of July 2010, CBN reports total assets of NGN 7.37 trillion (the equivalent of USD 48.6 billion).

Sources and Resources:

[1] The Punch: “Recapitalisation: Microfinance Banks Seek Additional Six-Month Grace”, February 8, 2011: http://www.punchng.com/Articl.aspx?theartic=Art201102081552882

[2] MicroCapital Article, October 29, 2010, “Central Bank of Nigeria (CBN) Gives Provisional Approval for 121 New Microfinance Bank (MFB) Licenses”, https://www.microcapital.org/microcapital-brief-central-bank-of-nigeria-cbn-gives-provisional-approval-for-121-new-microfinance-bank-mfb-licenses/

[3] MicroCapital Article, October 1, 2010, “Central Bank of Nigeria Revokes Licenses of 224 Microfinance Banks”, https://www.microcapital.org/microcapital-brief-central-bank-of-nigeria-revokes-licenses-of-224-microfinance-banks/

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