Nigeria: Reps Ask CBN to Suspend Deadline for MFBs Recapitalisation

A day to the expiration of the deadline given by the Central Bank of Nigeria (CBN) to microfinance banks (MFBs) to meet the first threshold of the new capital base, the National Assembly (NASS) has mandated the Central Bank of Nigeria (CBN) to immediately suspend the ongoing recapitalisation exercise of microfinance banks (MFBs) in the country.

This followed the adoption of a motion by Rep. Saidu Abdullahi ( APC-Niger) on the floor of the House of Representatives in Abuja.

Moving the motion, Abdullahi said, out of 874 licensed MFBs, about 612 may be negatively affected by the recapitalisation exercise.

According to him, from findings, only 30 percent of MFBs will be able to meet the April 2021 timeline while 70 per cent are likely to be out of business with severe consequences for the financial services industry.

He expressed concern that the MFBs may not be able to meet up with the recapitalisation requirement of the CBN within the proposed time.

This, according to him, is due to the adverse effect of COVID-19 and other economic realities.

He added that, in addition to the negative economic impact of the COVID-19 pandemic, Nigeria’s economy recently exited recession, the implication of which will be a significant slowdown in economic activities.

The liquidity position of the government and businesses, he said, have been impacted negatively.

The lawmaker said, if the 612 MFBs, which is equivalent to 70 per cent of the entire Nigerian MFBs, with the workforce of about 44,800 staff, were shut down, it would aggravate unemployment.

He said it would also compound the challenges of insecurity, youth restiveness, poverty, apathy and hopelessness across the country.

The house, however, urged the CBN to suspend the planned recapitalisation programme, until the economy is stabilised and considered safe for a new deadline to be fixed.

The house mandated the committee on banking and currency to interface with the CBN to find a workable solution to the challenges associated with recapitalisation of the MFBs in the country.

Earlier, the Central Bank of Nigeria(CBN) had ignored several calls pleading on the apex bank to extend the recapitalisation deadline for microfinance banks.

The first threshold in the recapitalisation exercise is expected to be reached at the end of this month.

However the CBN seems not to be shifting ground as the director, corporate communications of the apex bank, Osita Nwasinobi, told LEADERSHIP, in a text message that, “I am not aware of any calls for extension of the deadline for the first phase of the recapitalisation of MFBs and there is no such plan to extend it.”

findings show that while some of the bigger microfinance banks have met the criteria, some of the microfinance banks in the country have started looking into mergers and acquisitions and many others are still out on a limbo.

Last year, the CBN had extended the deadlines for compliance with the minimum capital requirements, stating that MFBs operating in rural, unbanked and underbanked areas (Tier 2) shall meet the N35 million capital threshold by April 2021 and N50 million by April 2022.

Also, MFBs operating in urban and high density banked areas (Tier 1) are expected to meet the N100 million capital threshold by April 2021 and N200 million by April 2022, whilst State MFBs shall increase their capital to N500 million by April 2021 and N1 billion by April 2022.

As at December 7, 2020, there are 874 microfinance banks in the country and president of the National Association of Microfinance Banks (NAMB), Alhaji Yusuf Ahmad Gyallesu, said most of its members would not be able to meet the deadline.

Gyallesu, who noted that the association is still deliberating with regulators on another extension, said if the appeal for a shift in the deadline fails, most of the 874 MFBs in the country ‘would die.’ He noted that the appeal is for an extension of the deadline to 2025 so that its members can grow organically.

“A large chunk of our members will die naturally and that’s not natural death because they are strangled to death by force and a lot of our members would die and once they die, it will affect all the surviving ones.

Gyallesu said that presently, “the situation is that our members are still struggling to meet the deadline and at the same time we are still intensifying effort through advocacy to see whether CBN can shift ground and extend the deadline for us and this is what we are doing.”