News Column

CBN Raises Finance Houses' Capital Base to N100 Million

July 10, 2014

Obinna Chima

The Central Bank of Nigeria (CBN) has announced a new minimum capital base of N100 million for the operation of Finance Companies in the country, up from the N20 million previously stipulated by the central bank.

However, the regulator has fixed a September 30th, 2015 deadline for compliance with the new capital base as well as other provisions in the revised guidelines for the finance houses sub-sector.

According to the latest revised guidelines for finance companies in Nigeria obtained yesterday, any company seeking a licence for a Finance Company business in Nigeria shall among other requirements, submit a detailed business plan or feasibility study as well as a five-year financial projection for the operation of the company, indicating its expected growth and profitability.

It also stated that finance companies would be permitted to participate in accessing and disbursing funds to small and medium scale enterprises via relevant vehicles/ intervention funds set up by the central bank, government or other relevant bodies/ agencies.

The central bank however noted that some of the factors that could lead to the withdrawal of an operator's licence may be as a result of the submission of false information/data during and/or after the processing of the application for licence or engaging in functions or activities outside the scope of its licence.

The board of directors of finance companies is expected to have a minimum of five and maximum of nine directors, with more than fifty per cent of the board of directors comprising of non-executive directors.

"The Board shall have a minimum of one and a maximum of two independent directors. The tenure of the CEO and directors of Finance Companies shall be limited to a maximum of two terms of five years each," it added.

Speaking on the sidelines of a meeting with operators of finance houses in the country in Lagos yesterday, the Director, Other Financial Institutions Department, Mr. Ahmed Abdullahi said the revised guideline would help to bring about strong and virile finance houses that would be able to effectively play their intermediation role.

"For us in the CBN, we are interested in having OFIs that would be able to service SMEs and provide access to finance to businesses so as to grow the economy.

"The CBN governor has said that he wants to have a people-centred central bank. He has emphasised job creation and businesses having access to finance and so all the institutions under the regulation of the CBN are supposed to be strong to perform that function," he added.

Continuing, the revised guidelines stated that every Finance Company shall submit its audited financial statements and the abridged version of the accounts to the Director of Other Financial Institutions Supervision Department for approval not later than four months after the end of the company's financial year.

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Source: AllAfrica

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