The President of the Bank Customers’ Association of Nigeria, Dr Uju Ogunbunka, has expressed concern over the Central Bank of Nigeria’s decision to revoke the operating licences of 46 microfinance banks, warning that the development will have far-reaching consequences for customers and the broader economy.

Speaking exclusively with DAILY POST on Thursday, Ogunbunka described the revocation as a major setback for depositors, businesses and Nigeria’s financial inclusion drive.
CBN on July 1 revoked the licences of 46 microfinance banks, including Credit Ville Microfinance Bank and Sycamore Microfinance Bank, citing their failure to comply with regulatory requirements.

Following the revocation, the Nigeria Deposit Insurance Corporation took over the failed institutions in line with its statutory mandate.

Reacting to the development, Ogunbunka said the action came as a shock to many bank customers, stressing that the implications extend beyond depositors to businesses, employees and the economy.

He explained that customers with deposits in the affected banks would have their funds tied down until the NDIC begins the reimbursement process, noting that only insured deposits are guaranteed.

“If the people who manage those institutions were conscious of the implications of getting them into troubled waters, perhaps they wouldn’t have done that.

“Unfortunately, it has happened. So, all we can do now is to see how much we can recover, because there is no way you can recover everything.

So, the implications are quite diverse. Customers that put their money in that place, of course, will have the money tied down until NDIC starts trying to, you know, pay the insurance, the amount that was insured.

“Until then, those people have to look for somewhere else to get money to tidy up themselves.

“And even when NDIC starts paying, it’s not going to be paying everything; it’s just going to pay the insured amount.

So, if somebody has more than an insured amount in that place, that means that one will only be paid after every other person has been paid and there is still some money remaining.

“That’s one point that we should take away from the problem,” Ogunbunka told NEWSMEN

Ogunbunka further warned that customers who relied on the affected microfinance banks for day-to-day transactions would be forced to seek alternative financial institutions, a situation he said could undermine years of progress in financial inclusion.

“The second one is that those who have been using that place to do their financial transactions will lose that opportunity.

“They have to look for somewhere else to do that. And if they don’t have an alternative place, that means for the meantime, they will be excluded from the financial inclusion we have all been talking about.

“In fact, most of them will even get afraid of going into any other bank again to try that because of what has happened, depending on the impact on each and every one of them and how they understand the system. So, we may end up losing some of the people who have already been included within the financial system.

“And those who have not been included will be afraid to join. So, they may have to stay away from the financial inclusion arrangement that we have been preaching and all of that,” he stated.

He also said the collapse of the banks would affect businesses that depended on credit facilities provided by the institutions.

“The economy itself will lose the opportunity of being financed through some of these things.

“Because some of these customers also had maybe credit lines they were operating. They were servicing them to do their businesses and all of that. All of that will now be a thing of the past.

“Unless they go somewhere else to make the arrangement. And if they are already owing and have not been able to tidy up, getting an alternative finance source from the banking system might be a Herculean task,” he added.

The BCAN president further warned that the closure of the banks would result in job losses, with possible consequences for Nigeria’s security situation.

“So, of course, those who are employed in the system will all lose their jobs and come back to become unemployed.

“And that may fuel more the insecurity we have been talking about in the system. Because if so many people don’t have jobs, they don’t have a way to get their normal feeding and upkeep. What do they do? They have to look elsewhere.

“And that elsewhere might be to go and start doing some of these criminal activities, unfortunately.”

He urged the NDIC to expedite the liquidation and reimbursement process to reduce the hardship faced by affected customers.

“So, like I have said, the problems are quite diverse and quite numerous.

“What I think we should be doing now is to get NDIC to quickly tidy up and do whatever it is supposed to do so that people can know their positions.

“We also advise those customers, any of them that have a bank nearby, to go and see how they can open a new account and start off transactions in those places.

“Especially those that are within the towns or cities. For those that are in the hinterlands, I don’t know how close the next bank will be to them.

“I’m not very sure if it will be very close such that they can move from wherever they are now to a further place or something like that.

“It means they have to be without a bank for quite a while. And that’s not the best,” he told NEWSMEN