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In response to the Central Bank of Nigeria’s (CBN) revocation of operating licenses for 132 microfinance banks in May 2023, the Nigerian Deposit Insurance Corporation (NDIC) has initiated compensation measures for affected customers, providing a maximum payment of ₦200,000 upon verification of deposits.
The recent move by the Central Bank to revoke licenses was attributed to various factors including inactivity, insolvency, failure to render returns, and prolonged cessation of banking services for more than six months. Despite lacking specific reasons for each affected bank, the CBN’s actions have left numerous customers seeking recourse.
Among the prominent institutions affected by the CBN’s directive are Eyowo Microfinance Bank, supported by fintech firm Softcom, and Purple Microfinance Bank.
While some affected banks have contested the revocation, alleging wrongful action by the CBN, others like Eyowo have sought to engage in dialogue to restore their licenses and resume operations. However, Eyowo’s attempt to partner with Providus Bank in June 2023 proved short-lived, leaving customers uncertain about the fate of their deposits.
According to sources familiar with the matter, affected microfinance banks are currently undergoing NDIC’s procedures, which include either winding down fully revoked banks or reinstating successful applicants. However, complications arise for customers with deposits exceeding the NDIC’s maximum compensation limit of ₦200,000.
In such cases, affected banks are engaging customers and assuring them of efforts to facilitate access to their deposits. Should these efforts prove futile, customers retain recourse to the NDIC, which will assess and liquidate the banks’ assets to compensate depositors.
While some banks are endeavoring to regain their licenses, the possibility of unsuccessful appeals remains, potentially leading to the liquidation of assets by the NDIC. This process, though viewed as a last resort, underscores the challenges faced by microfinance institutions in Nigeria’s financial landscape.
An NDIC official, speaking anonymously, emphasized the organization’s commitment to exploring alternative measures before resorting to liquidation, including shareholder interventions or facilitating takeovers by other banks to ensure stability within the sector.