MICROCAPITAL STORY: Central Bank of Nigeria (CBN) Celebrates New Microfinance Licenses and Challenges Governments at 3rd Annual Microfinance and Microfinance Entrepreneurship Awards

The Central Bank of Nigeria (CBN) announced at the 3rd Annual Microfinance and Microfinance Entrepreneurship Awards Ceremony that it has licensed a total of 840 microfinance institutions throughout the country in, 25 of which have been licensed since September 2008. CBN Governor Chukwuma Soludo stated that despite this increase in MFIs, as well as an increase in branches of universal banks by two thousand since 2003, access to formal finance in Nigeria remains at 35 percent. Local and state governments were challenged to establish and mainstream microfinance programmes while praising particular microfinance initiatives such as the Agricultural Credit Guarantee Scheme (ACGSF), the insurance deposits for microfinance by the Nigeria Deposit Insurance Corporation (NDIC) as well the development of a credit bureau, the Credit Reference Company.

Soludo also singled out the 24 state governments which have not been setting aside one percent of their annual budgets towards microfinance, as suggested in the CBN microfinance policy, saying that they are creating a “stumbling block” for the large numbers of people trying to get out of poverty. The 12 out of 36 states which are contributing to the scheme have contributed a total of N9.5 billion (USD 63 million), N620 million (USD 4.1million) of which is coming from Lagos alone. The goal of the CBN microfinance policy is to have at least two-thirds of state governments contributing one percent of their annual budgets to microfinance activities through licensed MFIs. Of the 845 MFIs operating in Nigeria, only 13 report to the MIX Market and only one made the MIX’s recently released Global Top 100 Composite List, Self-Reliance Economic Advancement Program (SEAP), which was ranked at 62. The rankings were summarized in this MicroCapital Paper Wrap-Up.

Also at the conference, Vice President Dr. Goodluck Jonathan announced that the economic outlook in Nigeria was favourable for 2009 due to the improving performance of the non-oil sector and he expressed confidence that the microfinance sector in Nigeria will provide the necessary funding required to increase participation in profitable economic activities. The Annual Microfinance Conference were held in unison with the Microfinance/Entrepreneurship Awards in Abuja. The theme of the conference was “Commercial Microfinance as a Tool for Poverty Alleviation” and ran from January 22 to 23, 2009.

The Credit Reference Company (CRC) was established by a consortium of eleven financial institutions to create a credible database of aggregated information of credit status and borrower behaviour within the Nigerian lending industry. The technical partners involved in the planning and build-up of operations are Dun and Bradstreet, Accenture, and International Finance Corporation. The CRC was launched in June of 2008, which was covered in this MicroCapital Story.

The Nigeria Deposit and Insurance Corporation (NDIC) was established in 1988 as a part of economic reform measures to strengthen the safety net for the banking sector following the government policy of liberalization and the introduction of the Structural Adjustment Programme (SAP) in Nigeria in 1986. At the time the NDIC was established, there was a sharp increase in the number of banks and a breakdown in the corporate governance in banking, and the primary priorities of the NDIC were to provide or facilitate financial assistance to banks as well as restructuring and managing distressed banks.

The Agricultural Credit Guarantee Scheme Fund was established in 1977 and began operations in 1978 and it guarantees credit facilities extended to farmers by banks for up to 75 percent of the amount in default, net of any security realized. The government owns 60 percent while the CBN owns 40 percent. The three main initiatives of the bank are: The Self-Help Group Linkage Banking, Trust Fund Model, and Interest Draw Back.

The CBN was established in 1958 as the bank with the overall control and administration of the monetary and financial sector policies of the Federal Government. Its mission is to provide a stable framework for the economic development of Nigeria through the effective, efficient and transparent implementation of monetary policy and management of the financial sector. At the end of 2007, total assets stood at N 7.4 trillion (USD 49.1 billion).

By Lori Curtis, Research Assistant

Additional Sources:

Business Day: “Another opportunity to learn the hard way

Leadership Nigeria: “CBN Licenses 840 Microfinance Banks

MicroCapital Story: “Central Bank of Nigeria (CBN) Declares that New Microfinance Bank Licenses Will Only Be Granted to Those Operating in Rural Areas

MicroCapital Story: “Only 12 of 36 Nigerian States Contribute to Microfinance Activities for a Total of $1.26m

MicroCapital Story: “Central Bank of Nigeria Grants 815 New Microfinance Licenses

MicroCapital Story: “Dun & Bradstreet to Run Nigeria’s First Credit Bureau, with Support of The International Finance Corporation, Accenture and Nine of Nigeria’s Leading Banks

Nigerian Tribune: “CBN decries states’ neglect of microfinance scheme” “Okumagba predicts capital market rejuvenation early next year

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