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CBN examination report indicts DFIs, PMIs and MFBs

By  Babajide Komolafe
The  examination report   of the Central Bank of  Nigeria (CBN) has indicted the management of  Development Finance Institutions (DFIs), Primary Mortgage Institutions (PMIs), Microfinance Banks (MFBs)  and Finance Houses of   poor/deteriorating  asset quality, weak corporate governance and lack of focus.


In its annual report for 2008, the CBN said that it conducted on-site examination of 430 Microfinance Banks (MFBs), 67 Primary Mortgage Institutions (PMIs), 77 Finance Companies (FCs), and four Development Finance Institutions (DFIs).

“The examination of the MFBs was conducted to ascertain the extent of compliance of the newly converted or licensed MFBs with the terms of their business plans and the extant rules and regulations as well as ensure a greater focus on core microfinance business. The exercise revealed a generally poor asset quality and weak corporate governance. On the average, however, the institutions were reasonably well capitalized above the prescribed minimum level of N20.0 million.

The examination of the PMIs revealed, among others, the continued preponderance of commercial assets over mortgage assets in their loan portfolios, which is an indication that the operational focus of the PMIs was at variance with their mandate of promoting housing finance/mortgage banking. Regular prudential returns were received from eighty (80) PMIs, compared with seventy two (72) in 2007, while fifteen (15) PMIs were penalized for late and non-rendition of returns and audited accounts.

Routine examination conducted on seventy-seven (77) FCs indicated that fifty-five (55) were actively involved in finance company business, while the remaining twenty-two (22) had either ceased operations, were undergoing restructuring, or mainly engaged in capital market activities. Other issues of regulatory concern, which the affected institutions were directed to address, were issues of under-capitalization, poor corporate governance, and unskilled and/or incompetent staff.

On-site examination was carried out on four (4) out of the five (5) DFIs. These included the Nigerian Agricultural Co-operative and Rural Development Bank (NACRDB), the Federal Mortgage Bank of Nigeria (FMBN), the Bank of Industry (BOI), and the Nigerian Export-Import Bank (NEXIM). The exercise revealed deterioration in asset quality and poor corporate governance in most of the


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