Reps ask CBN to halt recapitalisation of microfinance banks

The House of Representatives, on Wednesday, expressed opposition to the planned recapitalisation of Microfinance banks initiated by the Central Bank of Nigeria (CBN) until the economy stabilises.

The resolution was passed sequel to the adoption of a motion sponsored by Hon Saidu Musa Abdullahi, who called for the House intervention.

In his lead debate, Hon Abdullahi who expressed concern over the impacts of the exercise urged the apex bank to consider a new deadline for the recapitalisation programme.

“The House: Notes that in October 2018, the Central Bank of Nigeria reviewed the minimum share capital requirement of the three categories of Microfinance Banks as follows: (a) Unit Microfinance Banks (MFBs), from N20 million to N200 million; (b) State Microfinance Banks (MFBs), from N100 Million to N1 Billion; and (c) National MFB from N2 billion to N5 billion.

Also notes that on March 18, 2019, the CBN further reviewed the minimum capital requirements for the MFBs, allowing for instalment payment and categorization of Unit Microfinance into tiers 1 and 2, thus following the new capital requirement guideline, tier 1 MFBs (Urban) are to pay N200 million as a minimum capital requirement while tier 2 (Rural) are to pay N50 million as against the initial N20 million requirement in 2018.

“The House is aware that in 2020, the CBN considered the impact of COVID–19 pandemics on the economy and therefore revised the timeline for compliance with the minimum capital requirement for the MFBs by one year, which will be due by the end of April 2021.

“The House is aware of a survey conducted by the National Association of Microfinance Banks (NAMB), which indicated that out of 874 licensed MFBs, about 612 may be negatively affected by the recapitalisation policy as, according to findings, only 30 per cent 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.

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“The House is concerned that the MFBs may not be able to meet up with the recapitalisation requirement of the CBN within the proposed time due to the adverse effects of COVID–19 pandemic and other economic realities.

“The House recalls 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 as the liquidity position of the government and businesses have been impacted negatively.

“The House is cognizant that in times like this, economic thinkers advocate for injection of more liquidity into the economy to stimulate economic activities, encourage spending and prevent job losses as well as support indigenous businesses.

“The House is worried that if the 612 MFBs which is equivalent to 70 per cent of the entire Nigerian MFBs, with the workforce of about 44,800 staff, are shut down, it will aggravate unemployment, compound the challenges of insecurity, youth restiveness, poverty, apathy and hopelessness across the country,” he observed.

To this end, the House mandated its Committee on Banking and Currency to interface with the apex bank with a view to find a workable solution to the challenges associated with the recapitalisation of the MFBs in Nigeria and report back within four weeks for further legislative action.

NIGERIAN TRIBUNE