Why CBN revoked licenses of 46 microfinance banks

The Central Bank of Nigeria (CBN) has revoked the operating licences of 46 microfinance banks after determining they no longer met regulatory requirements, in the latest move by the apex bank to tighten oversight of the country’s financial system.

The revocation took effect on July 1 following the approval of Olayemi Cardoso, CBN governor under the provisions of the Banks and Other Financial Institutions Act (BOFIA), 2020, the regulator said in a statement on Wednesday.

The CBN said the affected lenders failed to satisfy conditions required for continued operation as licensed financial institutions.

According to the CBN the banks lost their licences for one or more reasons, including insufficient assets to meet liabilities, shutting down operations without regulatory approval, prolonged inactivity, failure to commence business within 12 months of receiving their licences and failure to maintain the minimum capital required under prudential regulations.

“The revocation became necessary because of one or more” of those regulatory breaches, the central bank said.

Microfinance banks play a key role in extending banking services and credit to low-income households, small businesses and underserved communities.

Read also: CBN revokes licenses of 46 microfinance banks over regulatory breaches

The regulator said the action formed part of its ongoing efforts to safeguard the stability of the financial system, protect depositors and ensure that licensed financial institutions comply with existing laws and regulatory standards.

The revocation follows a broader push by the Cardoso-led central bank to enforce stricter compliance across the banking industry through enhanced supervision and governance standards.
“The Central Bank of Nigeria remains committed to promoting a safe, sound and resilient financial system and will continue to take appropriate supervisory and regulatory actions, where necessary, to maintain public confidence in the Nigerian financial system,” the statement signed by Sidi-Ali, Hakama, CBN acting Director, Corporate Communications noted.

The latest action highlights the challenges facing parts of Nigeria’s microfinance banking industry, where some operators have struggled with weak capitalization, governance deficiencies and deteriorating asset quality amid a difficult operating environment marked by high inflation and elevated borrowing costs.

The CBN has in recent years intensified regulatory scrutiny of the sector as it seeks to ensure that only financially sound institutions remain licensed to operate.