Banking
Consolidation to Reduce Microfinance Banks in Nigeria by 44%—Agusto
By Modupe Gbadeyanka
There are strong indications that the number of microfinance banks in Nigeria will reduce by 44.4 per cent by the time the recapitalisation exercise of the sector by the Central Bank of Nigeria (CBN) is concluded in April 2022.
This information was contained in a report on the Microfinance Industry in Nigeria released by a foremost research and credit rating agency in the country, Agusto & Co.
A summary of the report made available to Business Post revealed that the over 900 microfinance banks operating in the country may be pruned to around 500 through consolidation activities as well as failures to meet the new requirements.
The apex regulatory agency in the nation’s bank sector, the CBN, is embarking on a two-phased increase in the minimum capital requirements for all categories of microfinance banks to take effect in April 2021 and April 2022.
As a result of this, the number of operators is expected to reduce and Agusto expects the microfinance industry to fare better in 2021 supported by the global roll-out of COVID-19 vaccines, accelerated digital transformation of microfinance banks and businesses in general, a renewed focus on essential sectors and government support for MSME businesses.
“The industry, however, continues to have a high level of susceptibility to macroeconomic challenges as was witnessed in 2020,” the agency said in its outlook for the year.
In the report, the credit rating agency paid attention to the impact of the COVID-19 pandemic on the sector and non-performing loans (NPLs), an assessment of the new capitalisation requirements for microfinance banks, analysis of the financial performance of microfinance banks and a detailed assessment of the major impediments to growth in the industry.
The pandemic and the technology gaps
Many microfinance banks in Nigeria, like in most developing countries with relatively low penetration of e-channels, witnessed a doubling of obligations that were past due for up to 30 days (PAR 30) during the first wave of the pandemic and lockdown restrictions in early 2020.
Despite up to N5 billion spent by the major national and state microfinance banks in Nigeria on the implementation of internet, mobile and USSD banking services, the industry remains heavily reliant on brick-and-mortar branches for the acquisition of customers and disbursement of loans and the collection of notes and coins for repayment. Given the low technological literacy in the country, collections from Micro, Small and Medium-Scale Enterprises (MSMEs) ground to a halt during the six-week lockdown, even in sectors categorised as essential and in regions not otherwise facing restrictions.
The economic environment also did not lend itself to loan disbursements given the sharp decline in business activities while many microfinance banks were caught off guard by the pandemic with few having the infrastructure in place to lend to MSMEs digitally, the report stated.
Microfinance banks rising NPLs
Agusto said the doubling of non-performing loans witnessed by the Nigerian microfinance industry in 2020 was exceptional in the light of the pandemic, thus many operators had to provide some forbearance and also restructure loans for clients with difficulty repaying as restrictions were gradually lifted.
One of the primary strategies adopted by operators in the sector to drive recoveries in 2020 was to promise customers who met all outstanding obligations access to new loans.
Subsequent to the six-week lockdown, many microfinance banks shifted focus to providers of essential goods and services and also existing customers to drive disbursements. The growth in the industry’s loan book was, however, depressed with the portfolio remaining flat as operators adopted a more cautious approach given the heightened credit risk of MSMEs in key sectors such as education, supply of non-essential goods and services, transportation and hospitality.
Agusto expects to see improvements in the microfinance industry in 2021 as the global and domestic economies rebound and operators adjust to the new realities with a 5 per cent growth in the loan book and a 400-basis point drop in the non-performing loan ratio from an average of 12.6 per cent for major operators.
The pandemic has raised the stakes for payment infrastructure
Microfinance banks in Nigeria have been given a loud wake-up call by the COVID-19 pandemic to accelerate investment in digital channels for loan disbursement and collection.
Many operators have since developed web portals for loan applications and are actively exploring the use of payment services such as Remita, Paystack and ultimately mobile money for collections.
The efficacy of such channels in Nigeria may, however, be limited by the low digital literacy of the unbanked, underbanked and low-income target market of the Microfinance Industry. Having a strong physical presence in various geographical locations remains the major driver of success in the microfinance industry in Nigeria.
The largest microfinance banks have branches spread across the country and are easily identifiable to the target market of low-income earners and MSMEs operating in the surrounding area.
Agusto said it believes the future success of digital channels in the microfinance space (critically for collections and consequently disbursements) will be strongly dependent on the adoption of digital payments by low-income earners and MSMEs in everyday purchase and sales transactions. On the contrary, if the underlying economic activities continue to be executed in notes and coins, then the fundamental challenge of converting collections to a digital transaction would remain.
Notwithstanding, the licensing of three payment service banks (PSB) – Hope PSB Limited, 9 PSB Limited and Moneymaster PSB Limited – may offer a possible solution in the mould of Safaricom’s popular M-Pesa platform in Kenya.
Users of the M-Pesa platform in Kenya and other East African countries are able to pay digitally from and to a mobile telephone number for groceries at a market stall, for public transport or for the services of an artisan, for example. This “mobile money” can be used to settle loan obligations using the same platform, thus facilitating digital collections.
By Adedapo Adesanya
Nigerian tier-1 lender, Zenith Bank Plc, plans to list on the London Stock Exchange in 2027 to broaden access to capital and strengthen client services.
“There are a lot of deals we have on the table to finance across the United Kingdom and other countries, for which we need to raise more capital,” a bank official said on Tuesday, as per Bloomberg, since Zenith didn’t disclose additional details of its plan.
The move will make Zenith Bank the second Nigerian lender to list on the United Kingdom’s major exchange, following Guaranty Trust Holding Company (GTCO) Plc.
Zenith Bank, which is Nigeria’s second-largest lender by market value, has opened a branch in Manchester today in addition to the operation it already has in London.
The Manchester branch has the capacity to create up to 30 new direct jobs, a boost for the economy of the UK’s North West region.
The chief executive of Zenith Bank, Ms Adaora Umeoji, said, “The United Kingdom remains a key global financial centre. The opening of Zenith Bank, Manchester, therefore, marks another important milestone in our international expansion strategy, enabling us to deepen relationships with our customers, support trade and investments, and connect businesses between Africa and the UK more effectively.”
Last year, the bank raised its capital above the N500 billion minimum requirement set by the Central Bank of Nigeria (CBN), and announced plans to expand in francophone West Africa.
Founded in 1990 by Mr Jim Ovia, Zenith Bank has grown into one of Africa’s most respected banking institutions, boasting a robust capital base and a remarkable history of year-on-year profitability.
Headquartered in Lagos, Nigeria, Zenith Bank operates over 500 branches and business offices across the 36 States of the Federation and the Federal Capital Territory (FCT).
The bank currently operates subsidiaries in several African countries, including Ghana, Sierra Leone, Gambia, and Cote d’Ivoire, while maintaining a presence in major international financial centres, including the United Kingdom, France, the UAE and China.
By Adedapo Adesanya
The Central Bank of Nigeria (CBN) has waived the affidavit requirement for reactivating dormant bank accounts to unlock billions of Naira trapped in inactive accounts, boost financial inclusion, and reduce compliance costs for customers amid ongoing economic reforms.
In a circular issued to banks and other financial institutions, the apex bank said the decision followed representations from stakeholders who had raised concerns about the administrative burden associated with affidavit requirements.
The directive was contained in a circular titled Guidelines on the Management of Dormant Accounts, Unclaimed Balances and Other Financial Assets in Banks and Other Financial Institutions in Nigeria, dated March 12, 2026.
The new directive supersedes an earlier circular issued on February 17, 2025, and takes immediate effect.
According to the circular signed by the director of the Financial Policy and Regulation Department, Rita I. Sike, the revised framework allows banks and other financial institutions to accept dormant account reactivation requests via alternative channels, provided adequate risk management measures are in place.
The CBN stated that the existing guidelines mandate banks and other financial institutions to implement specific measures and disclosures regarding dormant accounts, unclaimed balances, and other financial assets to improve transparency and facilitate the reunification of funds with their rightful owners.
“The guidelines are designed to enhance transparency, facilitate the reunification of funds with their rightful owners, and ensure full compliance with applicable legal and regulatory frameworks,” the CBN said.
Under the new directive, banks must still maintain strict identification and verification processes when handling requests to reactivate dormant accounts.
“In addition to the in-person submission of reactivation requests required under Section 8.0(i) of the Guidelines, banks and other financial institutions shall adopt alternative channels for receiving requests for the reactivation of dormant accounts,” the circular stated.
However, the apex bank emphasised that institutions must implement appropriate risk management strategies, including robust identification and verification measures, to ensure that the individual making the request is properly authenticated.
“Following representations received from stakeholders, the CBN hereby rescinds the requirement under Section 8.0(ii) for the mandatory use of affidavits in the reactivation of dormant accounts,” the circular said.
Despite the removal of the affidavit requirement, the regulator directed banks to apply enhanced due diligence procedures when processing reactivation requests.
The CBN clarified that the removal of affidavits applies only to dormant accounts that have not yet been transferred to the Unclaimed Balances Trust Fund Pool Account.
“For the avoidance of doubt, affidavits are no longer required for reactivating dormant accounts that have not been transferred to the UBTF Pool Account,” the regulator said.
However, customers seeking to reclaim funds already transferred to the Unclaimed Balances Trust Fund Pool Account will still be required to present affidavits in accordance with the existing guidelines.
“This rescission does not extend to the reclaiming of funds already transferred to the UBTF Pool Account, where affidavits remain mandatory,” the circular noted.
Beyond the reactivation process, the CBN also strengthened disclosure requirements relating to dormant accounts and unclaimed balances.
Banks and other financial institutions have been directed to publish specific information on their operational websites regarding dormant accounts that have not yet been transferred to the UBTF Pool Account, as well as unclaimed balances already transferred to the fund.
The information to be disclosed includes the names of authorised account holders, the type of account, the name of the financial institution and the branch where the account is domiciled.
Financial institutions that do not maintain operational websites must publish the information on the official websites of their respective industry associations.
In addition, the CBN directed banks and other financial institutions to publish the mandated information annually in at least two national daily newspapers.
Where such disclosures exceed two full pages, institutions may instead publish a single-page notice in at least two national newspapers, directing customers to a dedicated, easily searchable section of their corporate websites containing the full list of dormant accounts.
The regulator, however, provided exemptions for smaller institutions. State and unit microfinance banks are only required to display the information at their business locations and are not mandated to publish the details in national newspapers.
The CBN also addressed concerns raised by financial institutions regarding compliance with Nigeria’s data protection framework.
The regulator explained that the disclosure requirements are consistent with the provisions of the Nigeria Data Protection Act, 2023, which permits the processing of personal data where it is necessary for compliance with a legal obligation or the protection of the vital interests of individuals.
It further cited Section 72(11) of the Banks and Other Financial Institutions Act (BOFIA, 2020), which empowers the CBN to issue guidelines on the administration of unclaimed funds in banks and other financial institutions.
“Accordingly, the required disclosures are legally justified and fully consistent with the applicable provisions of the NDPA and BOFIA,” the apex bank said.
By Aduragbemi Omiyale
A former Deputy Managing Director of First Bank of Nigeria, Mr Gbenga Shobo, has been appointed to the board of FairMoney Microfinance Bank as chairman.
This appointment is part of the strategies deployed by the small technology-driven financial institution to strengthen corporate governance.
In a statement made available to Business Post on Tuesday, it was disclosed that a former chief executive of Letshego Microfinance Bank, Mr Debo Aderoju, has also been appointed to the board as an executive director and Chief Risk Officer.
The chief executive of FairMoney, Mr Henry Obiekea, said the appointment of the duo “reinforces our commitment to transforming FairMoney into a market-leading financial institution.”
“Mr Shobo joins our board with extensive experience in managing complex operations and a deep understanding of the retail and tech-enabled sectors, which will be invaluable as we continue to expand our services and deliver even greater value to our customers.
“In addition, Mr Aderoju’s strong expertise in governance and inclusive finance will serve as a key driver for enhancing operational efficiency, risk management and regulatory compliance,” he added.
Mr Shobo brings to the board over 35 years of experience in the banking industry. During his tenure at First Bank, he played a pivotal role in driving remarkable growth in digital banking volumes and supervised business units that generated significant portions of the bank’s total revenue.
An alumnus of the University of Ife, Harvard Business School, Stanford University and INSEAD, He has also served on the boards of various financial institutions, including microfinance, insurance and fintechs, highlighting his experience across diverse segments of the financial services ecosystem.
Renowned for his strategic insight, governance acumen, and boardroom expertise, his appointment is expected to further strengthen the bank’s governance architecture and provide strong strategic oversight as FairMoney continues to expand its footprint in Nigeria’s financial services landscape, while upholding the highest ethical standards.
On his part, Mr Aderoju is a banking professional with more than two decades of experience in credit management, enterprise risk management, and inclusive finance.
Earlier in his career, he worked at United Bank for Africa and later moved to First Bank of Nigeria Limited, where he oversaw risk management functions across multiple Sub-Saharan African markets. His appointment is subject to regulatory approval.
He is an alumnus of the Leadership Development Program at the Gordon Institute of Business and Science (GIBS), University of Pretoria, South Africa, and the Massachusetts Institute of Technology.
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