The Central Bank of Nigeria has cautioned Microfinance Banks (MFBs) against engaging in foreign exchange (forex) transactions and other prohibited activities including wholesale banking.1 According to the circular issuing this warning, the apex bank has observed the activities of some MFBs that have gone beyond the scope of their operating license. Cautioning MFBs is aimed at protecting them from the dangers of such prohibited transactions, given the banks’ relatively low capitalization. The CBN has noted that it will continue to monitor developments among MFBs and apply severe sanctions for breaches of extant regulations, including revoking the license of MFBs that fail to comply with the 2012 Revised Regulatory and Supervisory Guidelines for MFBs. Monitoring the activities of MFBs would ensure overall financial stability which is a prerequisite for sound macroeconomic policies, In particular, ensuring that all players in the banking system act within the remit of their operations enables efficiency in the transmission mechanism of monetary policy.
