‘If CBN can inject N786bn in one bank, it can save 154 MfBs with just N5bn each—Expert
Lagos development economist, Dr. Segun Arogundade, has described the insolvency and revocation of financial institutions’ including Micro Finance Banks, Finance Houses and Mortgage Banks as very wrong signals for small business operators including Micro Small and Medium Enterprises (MSMEs).
In a telephone interview on Thursday, he said “The collapse of smaller financial institutions in a fragile economy like Nigeria shows serious signs of chocking on the national economy and very disastrous for business startups”.
“For me, announcing the revocation of their licences without any plan to rescue the institutions at a time the same Central Bank of Nigeria (CBN) had just recapitalized just one private bank (Polaris Bank) to the tune of N786bn public fund is very hard to reconcile.
“I think if the CBN wants to modest in saving the economy, it should find fund and equally rescue these distressed MfBs, mortgage banks and finance houses so as to save small businesses which are the key drivers of the economy.
He argued that “The best option for the CBN in this scenario, knowing the importance and roles of these smaller financial institutions is to inject at least between N1bn to N5bn in each of them and give them one or two years to turnaround and return the money”.
“With the looming revocation of their licences, may struggling small businesses will equally go down and the economy will suffer it the more especially now another recession is looming.
According to him, “More people will be hurt if these financial institutions go down and that will hit runners of Small and Medium Enterprises (SMEs) which the same government has been trying to grow in numbers.
Dr Arogundade queried the rationale of the CBN to inject a whooping N786bn in just one bank only to allow over 182 financial institutions know for driving the informal sector to die.
Barely one week after injecting N786bn into stressed Skye Bank under its watch, the apex bank gave a notification to revoke the operating licences of 182 other financial institutions in the country.
A statement issued by the bank said 154 of the affected institutions are microfinance banks; six are primary mortgage banks; while the remaining 22 are finance companies.
Apex bank also noted that 62 of the microfinance banks had already closed shop; 74 became insolvent; 12 were terminally distressed; while six voluntarily liquidated.
It further listed the primary mortgage banks for revocation as Accord Savings and Loans Limited in Lagos that failed to recapitalise; and Ahocol Savings and Loans Limited in Anambra (state government-owned) that closed shop.
CBN also revealed that other mortgage banks for revocation are Trans Atlantic Savings and Loans Limited in Bayelsa (state government-owned) that became insolvent; Royal Savings and Loans Limited in Delta State that also closed shop; Amex Savings and Loans Limited in Lagos that failed to recapitalise; and Supreme Savings and Loans Limited also in Lagos that closed shop.
The apex bank said about eight finance companies voluntarily liquidated; 13 failed to recapitalise; while one became insolvent.
These financial institutions are scattered across the federation and had before now, been driving SMEs.
