CBN Unleashes Financial Shockwave: 46 Microfinance Banks Shut Down, Depositors Seek Payouts

The Central Bank of Nigeria (CBN) has officially revoked the operating licences of 46 microfinance banks across the country. This significant action, taken in accordance with the powers vested in the apex bank under Sections 12 and 13 of the Banks and Other Financial Institutions Act (BOFIA), 2020, underscores the CBN's commitment to strengthening the oversight of the financial system and ensuring strict compliance with extant laws and prudential regulations. The revocations took effect on July 1.

The CBN cited several critical reasons for this decision. Among the primary failures were the banks' insufficient assets to meet their liabilities, the cessation of operations without obtaining necessary regulatory approval, and prolonged periods of inactivity, leading to a halt in financial intermediation. Furthermore, some of the affected institutions failed to commence operations within the stipulated 12 months of obtaining their licences, while others were found to be non-compliant with maintaining the minimum capital funds unimpaired by losses, a fundamental regulatory requirement for their continued operation.

A detailed breakdown of the affected institutions reveals that Kano State accounted for the highest number of revocations, with 13 microfinance banks, followed by Lagos State with 8. Other states and the Federal Capital Territory (FCT) also saw revocations, with Abia, Abuja (FCT), Kaduna, Kebbi, Niger, Ogun, and Plateau each having two banks, while Anambra, Akwa Ibom, Bayelsa, Benue, Cross River, Delta, Kwara, Ondo, Osun, Oyo, and Rivers each had one. By category, 25 of the revoked institutions were Tier 2 microfinance banks, 18 were classified as Tier 1, and three were State microfinance banks.

Following the CBN's revocation, the Nigeria Deposit Insurance Corporation (NDIC) promptly announced its appointment as the official liquidator of these 46 failed microfinance banks. This appointment is in strict adherence to the provisions of the Banks and Other Financial Institutions Act (BOFIA) 2020 and the NDIC Act 2023, marking the immediate cessation of these banks' authorization to conduct banking business in Nigeria.

The NDIC has initiated the orderly closure of these institutions, commencing with their immediate takeover, verification of claims, and the process of paying insured deposits to eligible depositors. The corporation has issued a stern warning to the public against engaging in any transactions with the now-defunct banks. It also cautioned against any attempts to remove, conceal, or tamper with the assets, records, or properties of the failed institutions, emphasizing that such actions constitute a breach of law and will incur severe sanctions. Further information regarding the liquidation process will be communicated to depositors and the general public as it progresses.

Notable microfinance banks among those whose licenses were revoked include Gold Microfinance Bank, Bompai Microfinance Bank, Creditville Microfinance Bank, Minjibir Microfinance Bank, Kanopoly Microfinance Bank, Now Now Digital Microfinance Bank, Safegate Microfinance Bank, Supreme Microfinance Bank, Verdant Microfinance Bank, Entrepreneur Microfinance Bank, and Avantus Microfinance Bank, alongside many others spread across the aforementioned states.