Citing Persistent Regulatory Breaches, Others CBN Revokes Operational Licences of 46 Microfinance Banks

The Central Bank of Nigeria (CBN) recently revoked the operating licences of 46 microfinance banks (MFBs) across the country, effective July 1, 2026. This decisive action was taken in accordance with Sections 12 and 13 of the Banks and Other Financial Institutions Act (BOFIA) 2020, citing persistent regulatory breaches. The grounds for revocation included insufficient assets to meet liabilities, unapproved cessation of operations, prolonged inactivity, failure to commence business within 12 months of license approval, and inability to maintain minimum capital funds unimpaired by losses. This move underscores the CBN's commitment to strengthening financial sector stability, protecting depositors, and ensuring strict adherence to prudential regulations within Nigeria's microfinance sub-sector.

In a significant regulatory intervention, the Central Bank of Nigeria (CBN) announced the revocation of operating licences for 46 microfinance banks (MFBs) nationwide, with effect from July 1, 2026. This action, approved by the CBN Governor, Mr. Olayemi Cardoso, signals a renewed commitment by the apex bank to enforce stringent compliance within the financial sector. The decision was communicated through a statement by the Acting Director of Corporate Communications, Mrs. Hakama Sidi-Ali, highlighting the institutions' failure to meet critical regulatory requirements for continued operation.

This development is not merely a routine regulatory exercise but a clear message to all financial institutions regarding the imperative of sound financial management and strict adherence to the established legal and prudential framework. The revocation aims to safeguard the stability of the financial system, protect depositors' funds, and ensure that only robust and compliant institutions participate in the crucial microfinance segment, which plays a vital role in financial inclusion and grassroots economic development.

The article will delve into the statutory powers enabling the CBN's action, the specific regulatory breaches identified, and the broader implications for the Nigerian financial landscape, particularly for practitioners advising financial institutions and those affected by such regulatory interventions.

The regulatory framework governing financial institutions in Nigeria, including microfinance banks, is primarily anchored in the Central Bank of Nigeria Act 2007 and the Banks and Other Financial Institutions Act (BOFIA) 2020. These statutes empower the CBN to license, regulate, and supervise banks and other financial institutions, ensuring the stability and integrity of the Nigerian financial system. Specifically, BOFIA 2020 provides comprehensive guidelines on the conditions under which a banking license may be revoked.

Microfinance banks were established in Nigeria to enhance financial inclusion, providing access to credit, savings, and other financial services to low-income individuals and micro-entrepreneurs often excluded from conventional banking. The CBN's Microfinance Policy, Regulatory and Supervisory Framework for Nigeria, first introduced in 2005 and subsequently revised, outlines the permissible activities, licensing requirements, capital adequacy, corporate governance standards, and risk management controls for MFBs. The Guidelines for the Regulation and Supervision of Microfinance Banks in Nigeria (January 2020) further categorise MFBs (Unit, State, National) and stipulate minimum capital requirements and operational guidelines, with periodic reviews to strengthen the sub-sector.

Sections 12 and 13 of BOFIA 2020 are particularly pertinent, granting the CBN Governor, with the approval of the Board, the power to revoke a license if a bank fails to meet its obligations, becomes insolvent, or engages in unsound practices. This power is a critical tool for the CBN to maintain a sound and resilient financial system, as demonstrated by previous revocations, such as the 132 microfinance banks whose licenses were withdrawn in May 2023.

The recent revocation of 46 microfinance bank licences by the CBN underscores the rigorous application of its regulatory powers under BOFIA 2020. The apex bank explicitly cited several grounds for its action, including: insufficient assets to meet liabilities; closure of operations without CBN's approval; inactivity and cessation of financial intermediation; failure to commence operations within 12 months of license approval; and failure to maintain minimum capital funds unimpaired by losses. These reasons align directly with the provisions of BOFIA 2020, which empowers the CBN to intervene when a financial institution's operations are deemed detrimental to public confidence or when it fails to comply with prudential requirements.

The CBN's action reflects a broader strategy to strengthen oversight of the financial system, protect depositors, and ensure that licensed institutions comply with extant laws and prudential regulations. The emphasis on minimum capital requirements and asset quality is crucial for the stability of MFBs, which serve a vulnerable segment of the population. The Guidelines for the Regulation and Supervision of Microfinance Banks in Nigeria (January 2020) specify tiered capital requirements, and failure to meet these thresholds, especially when capital is impaired by losses, is a clear breach.

Furthermore, the revocation highlights the CBN's intolerance for operational dormancy or unauthorised cessation of business. Microfinance banks are expected to actively engage in financial intermediation to fulfil their mandate of promoting financial inclusion. Prolonged inactivity or closure without regulatory approval not only indicates a failure to meet operational conditions but also poses risks to depositors and the overall financial ecosystem.

For aggrieved institutions, BOFIA 2020 sets a strict 30-day window to challenge a license revocation at the Federal High Court. Crucially, the Act limits the available remedy to monetary compensation not exceeding the paid-up capital at the time of revocation, explicitly precluding restorative or similar reliefs. This provision underscores the CBN's broad discretionary powers in maintaining financial stability and limits the ability of defunct institutions to resume operations, thereby ensuring finality in regulatory decisions. Upon revocation, the Nigeria Deposit Insurance Corporation (NDIC) is mandated to commence the winding-up process, prioritising the settlement of insured depositors.

The CBN's revocation of 46 microfinance bank licences serves as a stark reminder of the regulatory authority's unwavering commitment to fostering a safe, sound, and resilient financial system in Nigeria. For legal practitioners, this development reinforces the critical importance of robust compliance frameworks, diligent corporate governance, and proactive risk management within financial institutions, particularly those operating in the microfinance sector. Firms advising MFBs must ensure their clients are not only aware of but are also actively meeting the stringent capital adequacy, operational, and reporting requirements stipulated by the CBN and BOFIA 2020.

Practitioners should also be prepared to advise on the limited recourse available to institutions facing revocation, especially the 30-day window for judicial review and the restriction to monetary compensation. The ongoing regulatory tightening by the CBN suggests that further enforcement actions may be anticipated as the apex bank continues its efforts to sanitise the financial sector. Legal professionals should therefore closely monitor CBN circulars and guidelines, advising clients on necessary adjustments to their business models and capital structures to avoid similar fates and to contribute positively to Nigeria's financial inclusion objectives.