Central Bank Issues Warning to Microfinance Banks – Finance Bitcoin News

Changelly
Central Bank Issues Warning to Microfinance Banks – Finance Bitcoin News
Bitbuy


The Central Bank of Nigeria (CBN) has threatened punitive sanctions against microfinance banks that violate the conditions of their operating license through the performance of foreign currency-related transactions. In its latest circular, the CBN claims that microfinance banks have a very low capitalization hence their handling of such transactions threatens the stability of the financial system.

CBN Takes Fight to Regulated Institutions

The new warning from the central bank is the third time since the CBN’s last monetary policy committee meeting that the apex bank has warned or taken action against financial institutions failing to adhere to its forex regulations.

As previously reported by Bitcoin.com News, the CBN announced the end of forex sales to Bureau de Change operators after it accused them of helping to prop up the foreign exchange black market. More recently, the CBN announced the freezing of bank accounts of fintech firms that are similarly accused of fueling the naira’s plunge.

However, in a circular sent to Nigeria’s microfinance banks, the CBN threatens to revoke the operating license of a microfinance bank that is caught red-handed. The circular states:

bybit

The CBN will continue to monitor developments in the Microfinance Banking [MFB] sector and apply severe regulatory sanctions for breaches of regulations, including revoking the licence of non-compliant microfinance banks.

CBN’s Ineffective Threats

Still, despite the CBN’s threats and past sanctions, Nigeria continues to experience shortages of foreign exchange on the formal market. In fact, some of the threats appear to have worsened the naira’s already precarious position.

For instance, immediately following the CBN’s decision to bar forex sales to Bureau de Change operators, the naira’s exchange rate on the parallel market plunged to a new low of US$1 for N525. This unofficial rate is 25% lower than the CBN’s official rate of US$1 for N411.

Although it is not immediately clear how the latest threat is going to impact the naira’s exchange rate, it is highly unlikely this will kill the parallel market. It now remains to be seen if the CBN intends to also use its largely ineffective threats policy against commercial banks and other, larger financial institutions.

Is it possible for the CBN to reverse the naira’s depreciation via the use of threats only? Tell us what you think in the comments section below.

Image Credits: Shutterstock, Pixabay, Wiki Commons

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.



Source link

Bitbuy

Be the first to comment

Leave a Reply