CBN crackdown to spur microfinance consolidation, deposit shift

The Central Bank of Nigeria’s revocation of dozens of microfinance bank licences unsettled depositors and raised concerns over rural lending, but analysts believe the crackdown will strengthen the sector through consolidation and improved regulatory compliance, JIDE AJIA reports

The Nigeria Deposit Insurance Corporation has officially assumed responsibility for overseeing 46 microfinance banks after the Central Bank of Nigeria revoked their operating licences on Wednesday last week.

The sweeping regulatory action has triggered a frantic scramble among depositors, forcing institutional leaders to immediately weigh in on what this means for the fragile macroeconomic landscape.

Financial analysts at Meristem Securities, in their weekly market analysis report, projected that the mass revocation will ultimately trigger an intense wave of structural consolidation and shift the dynamics of retail banking deposits across the country.

Licence revocation, casualties

The apex bank disclosed that the revocation, which took effect from 1 July 2026, was approved by the CBN Governor, Mr Olayemi Cardoso, in exercise of the powers conferred on him under Sections 12 and 13 of the Banks and Other Financial Institutions Act 2020.

In a statement signed by the Acting Director of Corporate Communications, Hakama Sidi‑Ali, the regulatory authority explained that the affected institutions had failed to remedy various operational deficiencies required to maintain their status as licensed financial institutions.

According to the apex bank, the decisive action became necessary after a series of supervisory reviews revealed that the institutions were plagued by terminal regulatory infractions. These breaches included holding insufficient assets to meet liabilities, unauthorised closure of business premises, prolonged inactivity, complete cessation of financial intermediation, failure to commence operations within 12 months of licence issuance, and falling short of the statutory minimum capital requirements.

“The revocation of the licences is part of the bank’s ongoing efforts to safeguard the stability of the financial sector, protect depositors, and ensure that licensed institutions comply with current laws and regulatory requirements,” the CBN statement read in part.

The massive regulatory clampdown comes amid a broader, aggressive campaign by the Cardoso‑led CBN to sanitise Nigeria’s financial services industry.

Since assuming office, the current CBN leadership has consistently warned that it will show zero tolerance for weak corporate governance, chronic undercapitalisation, and high non‑performing loans across all tiers of banking.

Historically, this is not the first time the apex bank has undertaken a wholesale purge of the microfinance space; in May 2023, the CBN revoked the licences of 179 microfinance banks, four primary mortgage banks, and three finance companies over similar operational failures.

The multi‑state sweep hit several prominent and digital‑first microfinance brands. The 46 affected institutions include Minji‑Se Churchill MFB, Merchant MFB, Janmaa MFB, Busu MFB, Gold MFB, Zain MFB, Bompai MFB, Ajwa MFB, NOW NOW Digital MFB, Crystabel MFB, Chanelle MFB, and Abia SME MFB.

Others are Kamba MFB, Iwade MFB, Winview MFB, Zuru MFB, Minjibir MFB, Shanono MFB, Sumaila MFB, Rimin Gado MFB, Mwaghavul MFB, Sycamore MFB, Tofa MFB, and Safegate MFB.

The list also includes Creekline MFB, Bestar MFB, Livingspring MFB, Apple MFB, Stanford MFB, Frontline MFB, Zafec MFB, Supreme MFB, Bejin‑Doko MFB, Kanopoly MFB, Bellbank MFB, Yeneng MFB, Creditville MFB, MBAG MFB, Straight Sahara MFB, OurPass MFB, Verdant MFB, Basawa MFB, Casha MFB, Esteem MFB, Entrepreneur MFB, and Avantus MFB.

NDIC as liquidator

Following the mass closure, the corporation has been officially appointed as the Liquidator, acting under Section 12 (2) of the Banks and Other Financial Institutions Act 2020 and Section 55 (1 & 2) of the NDIC Act 2023.

In an immediate response to the regulatory directive, the Head of the Communication & Public Affairs Department at the NDIC, Hawwau Gambo, issued a strict public directive regarding the assets of the dissolved institutions.

“Members of the public are strongly advised against any unauthorised transaction with the closed banks, or any attempt by individuals to remove, conceal, retain, or interfere with the assets, records, or properties of the banks, as this may constitute a violation of the law that could attract appropriate legal consequences,” Gambo stated.

The corporation further emphasised that it has mobilised resources for a swift intervention, stating, “The NDIC has commenced the process of the orderly closure of the failed banks with their immediate takeover, verification and payment of insured sums to eligible depositors.”

Despite the looming anxieties, both the regulators and the NDIC have assured stakeholders that the liquidation process will follow due process to alleviate customer distress. Under current statutory guidelines, the NDIC will use the banks’ existing branches to verify depositors and disburse newly reviewed upward insurance caps.

The NDIC has committed to keeping the general public and eligible depositors updated on an ongoing basis regarding subsequent steps in the liquidation exercise.

Financial shocks, concerns

While the NDIC moves to secure the financial safety net, financial experts and consumer advocates are sounding alarms over the vacuum this purge creates.

Speaking on the immediate structural macroeconomic shock in an exclusive interview with The PidomNigeria, the President of the Bank Customers Association of Nigeria, Professor Uju Ogubunka, warned that the sudden closure of 46 financial brands disrupts local credit systems.

He said, “The economy, of course, would also have to suffer for it because the roles they have been playing within the economy, they will no longer play those roles.

“If we don’t have other banks and financial institutions to absorb those roles, then that means there will be a vacuum, or at least there will be limitations in those services.”

Ogubunka pointed out that the aggressive clampdown threatens to undo years of grassroots financial sensitisation, hitting market women, smallholder farmers, and small business owners the hardest.

“We have been talking about financial inclusion, and that has put some degree of a minus aspiration of the country to have an improved level of financial inclusiveness,” he added.

The revocations were largely concentrated in Kano and Lagos, which together accounted for almost half of the affected institutions. Analysts noted that this geographical concentration highlights deep‑seated vulnerabilities that extend far beyond small, community‑based lenders and reflect broader structural weaknesses across the microfinance industry.

Sector consolidation

In its weekly market analysis, Meristem Securities observed that the enforcement reflects the prolonged strain that elevated inflation and macroeconomic instability have placed on smaller operators, eroding balance sheet strength and increasing solvency pressures.

The analyst said, “We believe the exercise aligns with the CBN’s broader regulatory agenda of strengthening financial system resilience through stricter prudential oversight.

“Following the ongoing recapitalisation of commercial banks, the regulator appears to be extending the same emphasis on capital adequacy, governance and operational sustainability to the microfinance segment, increasing the likelihood of further consolidation among weaker operators.”

While the closures may temporarily constrain access to credit in some underserved communities, the long‑term impact is expected to be positive. According to Meristem, the development could significantly accelerate deposit migration towards better‑capitalised institutions, including larger commercial banks and stronger digital microfinance operators.

The removal of persistently weak institutions is tipped to ultimately improve market confidence, strengthen financial stability, and support a more resilient microfinance sector.

Reflecting on the finality of the regulatory intervention, Professor Ogubunka concluded that while painful, the exercise remains an essential preventative boundary for banking sector hygiene.

“The best thing that has happened is that, well, CBN has taken the bull by the horns to say, ‘Okay, you can no longer function because of X, Y, Z. So please, do not enter that business anymore.’ We are protecting the country with this regressive policy, and the thing is that it’s super good.”