Senate disagrees with CBN over new capital base for banks

In an apparent show of disapproval to the recent decision by the Central Bank of Nigeria (CBN) to increase microfinance banks’ minimum capital base, the Senate committee in charge of the Nigerian financial sector said it is concerned that the move could be counterproductive.

The Chairman of the committee, Senator Rafiu Adebayo Ibrahim, stated this during a recent supervisory visit to the Nigeria Deposit Insurance Corporation (NDIC) in Abuja.

According to him, the move by the apex bank could go against all efforts being made so far to ensure financial inclusion in the country.

Recall that on October 22nd, the Central Bank of Nigeria had issued a circular to all the microfinance banks in the country informing them of the review of their minimum capital requirement.

According to the circular by CBN, the decision to increase the minimum capital requirement for microfinance banks came out of the need to protect the sub-sector from collapse. Microfinance banks in the country have been facing challenges ranging from “adequate capital base, weak corporate governance, ineffective risk management practices, the dearth of requisite capacity” and more.

Therefore, to contain the situation, the CBN swung into action and increased the financial requirements for microfinance banks thus- Unit Microfinance Bank: Now N200 million, up from N20 million; State Microfinance Bank: Now N1 billion, up from N100 million; National Microfinance Bank: Now N5 billion, up from N2 billion.

It should be noted that Senator Ibrahim gave no clear-cut explanation as to why he believes the new CBN capital requirement will affect capital inclusion efforts.

The CBN 2005 microfinance policy positioned microfinance banks as veritable tools for the actualisation of objectives of financial inclusion, in that Nigerians can easily access financial services.