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CBN gives finance companies 18 months to recapitalize

By on July 11, 2014

The Central Bank of Nigeria has given finance companies 18 months to recapitalise or lose their operating licence.

The Director, Other Financial Institutions, CBN, Mr. Ahmed Abdullahi, said this in Lagos on Wednesday at the unveiling of revised guidelines for finance companies in the country.

He explained that in line with new guidelines, finance companies had been mandated to recapitalise from N20m to N100m.

Abdullahi said, “The deadline for compliance with the provisions of the revised guidelines shall be September 30, 2015; the list of valid licences shall be published by the Central Bank of Nigeria from time to time.

“The objective is to have institutions that are strong and virile and are able to fulfil the purpose for which they were set up. For the institutions, their purpose is to return profit to their shareholders. But as regulators, ours is different.”

He said although some stakeholders had suggested that the new minimum capital base for finance companies should be N250m, the leadership of the central bank in its wisdom chose to peg it at N100m.

The development came barely three weeks after the CBN released new guidelines for Bureaux de Change operators, asking them to recapitalise from N10m to N35m, among other conditions.

Abdullahi gave the assurance that the central bank would continue to facilitate the growth of the sub-sector, adding that it would be available for the industry on capacity building programmes.

“We will be happy to see a situation where finance companies relate together. For this reason, we will support inter-finance companies transactions,” he said.

According to Abdullahi, the CBN has set up a committee that is expected to come up with the guidelines for the disbursement of the N220bn meant for Micro, Small and Medium Enterprises. The fund is meant for micro finance banks, finance companies and other financial institutions.

During the event, the former President, Finance Houses Association of Nigeria, Mr. Eddie Osarenkhoe, called on the central bank to help project the image of finance companies in a better light so that the public would no longer see the operators as fraudsters.

This, he said, was necessary because similar assistance to the MFBs had helped to boost their image.

Abdullahi said the central bank was aware of the damage reputational risk could pose to a business, and as such would work to ensure to safeguard the image of the sub-sector.

As a way of achieving this, the director said the CBN was already planning to arrest and prosecute illegal finance companies in the country.

 

 

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