MFBs Heading For Crisis As CBN Stops Operators From Sale Of FOREX


By Elizabeth Chukwuma

Between 2015  and now, the Nigerian local currency , the naira, has  continued to slide against the North American country of the United States, US, dollar, and other major currencies in the  world including the United Kingdom, UK, Pounds  and the ERO. The situation is so bad that the  Godwin Emefiele,  led Central Bank of  Nigeria, CBN,  had repeatedly accused the operators of the Bureau De Change, BDCs,  of killing the naira.

 The fallout has been the consistent suspension of the sales of Forex to the BDCs as a way to stabilize the naira. The  CBN , had made Nigerians to believe in the recent ban, that it was necessary  because  the BDCs has become  become conduit  for  illicit  forex flows   in the country and graft.

Emefiele, the CBN governor, who is not happy that the BDCs,  are now used  for graft , may have further expressed his anger when he said that the apex Bank  will ‘’no longer  process applications  for  the BDC licenses in the country’’.   He may have been encourage to take the extreme decision  exclude the BDCs, from the Forex market because of the alleged complaint  from   some Multilateral Financial Institutions, Embassies and donor agencies  that the illegal transactions of the BDCs, had hindered   the flow of Forex into the country.

Emefiele: CBN Governor

Perhaps, to  discourage the international bodies, Embassies and donor agencies  from channeling  their Forex  through the Black market  instead of the  of using  the official investors , import and export window, called NAFEX , to do so, had no option but to ban the sale of Forex to the BDCs .In spite of the ban on the sale of Forex to the BDCs, the situation in the Nigerian Forex market has  not changed as the naira has continued  to depreciate.

The CBN, may have seen the Microfinance Banks, MFBs, as another Financial Institution killing the naira, claiming that the MFBs  Licensed to operate in the country have started engaging Forex transactions   and other unauthorized dealings.  Emefiele, the CBN governor, who could not hide his feelings   was to have made it  clear to the MFBs,  operators, that they are meant  to focus their  primarily  on providing   financial services  to  retail and micro-clients  and not going fully into whole sale Banking or sale of forex to Customers which is the exclusive responsibilities of the Banks.  The Bank may have its reason

. This because of its low  Capitalisation  compared  to the Banks  which have a  N25 billion Capitalisation base. It was therefore not very surprising why the CBN had warned the MFBs, to stop engaging in whole Banking   and foreign exchange  transactions as it poses a significant risk with dire consequences for the country’s Financial stability

Perhaps to make the MFBs  understand that it bite, it has warned the operators, ‘’to stop  engaging  in Foreign  exchange transactions  and other unauthorized Financial dealings . At the instance of the CBN  governor, Ibrahim Tukur,  from  the apex Bank Financial Policy  and Regulation Department,  on Friday, August 20, 2021, had issued a Circular, to the MFBs, titled  , ‘’Cessation  of Non-permissible  Activities’’.

In releasing the circular,  Tukur noted that ‘’the CBN, has  observed   the activities of some of some of the MFBs operating in the country and found out that they  have  gone beyond   the remit  of their operating licenses by engaging in whole sale Banking and forex transactions’’.

.The CBN, governor  would want the MFBs operators ‘’to strictly comply  with the extant  Revised Regulatory and Supervisory 2012,  Guidelines,  for their operations’’.  He has made  it to those that cares to listen  that the  apex Bank will not hesitate to sanction any  MFBs  which contravenes the 2012, Revised Regulatory and Supervisory Guidelines for their operations based on their remit. He insists that the ‘’MFBs  are  strictly prohibited  from Foreign  Exchange  transactions’’.

For now,  the Emefiele led CBN, which under pressure to stabilize the  naira and stop it from further sliding to avoid turning it into another Uganda shillings during the regime of late Field Marshall Idi Amin Dada as he  is determined to set example with one or two MFBs, to serve as a deterrence to others competing with the traditional Banks in wholesale Banking and Foreign Exchange transactions.

It is not surprising why the Monetary Regulatory Authority has continued’’ to monitor developments  in the MFBs  in the nation’s financial sector to ensure they comply with the new policy. The Bank may have sent a message to the MFBs, that it will not hesitate to  apply  Regulatory sanctions  for breaches of the extant  regulations’ of its operating guidelines’. The sanctions according to informed sources include ‘’the revocation of the operating license of the MFB, operator, which the Bank had said is in line with section 19of the extant Guidelines .

Despite coming hard on the BDCs and MFBs, over the sale of Forex, the naira has not appreciated against the dollar  in the last couple of weeks.  Osita Nwanisobi,  CBN, acting Director, Corporate Communications had attributed to the continuous flagrant abuse of the legal tender by hurling wads  of  n naira notes in the air and stamping on the currency  at social functions. He noted that’’ there have also been cases  where mishandle  the naira, deface it, hawk the currency in parties and reject the currency in some instances’’, which is not good enough for the economy.

He believes that the only way the  CBN ban on the sale of Forex  to BDCs or stopping the MFBs , from engaging in the Sale of Forex  would impact positively on the  naira  in the foreign Exchange Market  is for Nigerians ‘’to handle the naira, which is the  country’s legal tender and symbol of national pride with care’’, like the US dollar , EURO and the British Pounds.

This may have informed  why the CBN, has warned Nigerians  at social functions , to desist  from disrespecting  the naira or risk being  arrested  by law enforcement Agencies personnel.

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