The Central Bank of Nigeria CBN on the 9th of January, 2023 formally released a circular in response to the widespread practice of Other Financial Institutions (OFIs) having substantial assets invested in various funds managed by uninsured entities.
Most of these assets were typically designed as placements or investments in banks & OFIs and as a result,not only fell outside the scope of permissible activities of OFIs but also placed depositors funds at risk.
The high credit & liquidity risk to OFIs involved in placements and investments in products or funds managed by uninsured entities cannot be overemphasized as the probability of recovering such invested funds or compensation in any form, in the event of counterparty default, is low.
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Consequently, this led to the CBN directing in its circular that all OFIs are required to immediately :-
– Divest from all managed funds or products of uninsured entities and to desist from such investments in future.
– Liquidate within 90 days of the release of the CBN letter/circular, all existing placements in such entities.
