AS the Central Bank of Nigeria (CBN) faces scrutiny over its recent revocation of operating licences of 46 microfinance banks, prominent economists and academics have urged regulators to treat licence revocation as a last resort, rather than a first response. They advocate for stronger early intervention, robust monitoring, and preventive supervision to safeguard financial inclusion and economic stability.
Muhammad Akaro Mainoma, Professor of Accounting & Finance and immediate past vice-chancellor of Nasarawa State University, Keffi, argued that while the stability of the banking sector is vital for financial intermediation and growth, abrupt revocations can be disruptive.
Community and microfinance banks play a critical role in serving rural and underserved areas.
“Licence revocation should be a last resort, not a routine response,” Professor Mainoma stated. He emphasised that effective supervision through off-site monitoring and on-site inspections should identify distress signals early. Underperformance in these institutions often stems from weak capital bases, poor risk management, insider lending, and exposure to economic shocks. Allowing problems to fester until failure occurs leads to higher resolution costs, loss of depositor confidence, disrupted credit flows, and systemic risks.
The professor called for early intervention tools such as capital enforcement, loan restructuring, mandatory recapitalisation, management changes, and stress testing. He recommended drawing from international best practices, including risk-based supervision, mergers with stronger entities, and orderly resolutions to minimise economic disruption.
Echoing these views, Uche Uwaleke, president of the Capital Markets Academics Association of Nigeria (CMAN) and a renowned Professor of Capital Market at Nasarawa State University, commended the CBN’s decisive action while stressing the need for vigilance.
“Going forward, the CBN will be well advised to remain vigilant and continue to strengthen its risk-based supervision,” Prof. Uwaleke said. He highlighted the importance of early detection, prompt intervention, and enforcement of prudential standards. He also urged close collaboration with the Nigeria Deposit Insurance Corporation (NDIC) for timely payment of insured deposits and greater public awareness.
Professor Uwaleke advocated supporting capacity building in the microfinance sector to enhance its role in financial inclusion, entrepreneurship, and financing for micro, small, and medium enterprises (MSMEs).
“A strong, well-regulated microfinance sector remains indispensable to Nigeria’s economic development agenda,” he added. While acknowledging that regulation is not about keeping weak institutions alive at all costs, he described the CBN’s actions as reinforcing the resilience and credibility of the financial system.
Economist and public policy analyst Dr. Ayinde O. Ayinde, called for a broader national conversation beyond enforcement. He noted that every licence revocation is a significant economic, legal, and policy event with implications for stability, depositor protection, and inclusion.
“Modern financial regulation is founded upon the enduring principle that prevention is invariably superior to resolution,” Dr. Ayinde said. He questioned whether supervisory examinations were frequent and risk-based enough, if early warning signs were acted upon, and if distressed banks received adequate recovery opportunities before closure.
Drawing lessons from the United States, Canada, Europe, Asia, and other African countries, Dr. Ayinde emphasised proactive supervision, prompt corrective actions, stress testing, and governance reforms. He urged the CBN to deepen macroprudential surveillance, adopt technology-driven analytics, strengthen early warning systems, and promote recapitalisation and consolidation.
The experts agree that while the CBN has demonstrated resolve in enforcing standards, the focus should shift toward preventive mechanisms. In Nigeria’s challenging macroeconomic environment of inflation, exchange rate volatility, and other pressures, effective regulation must balance firmness with foresight to protect depositors, sustain inclusion, and support long-term growth.
Financial stability, they conclude, is best measured not by the number of failures but by the institutions successfully stabilised before collapse becomes inevitable.
