Latest Recapitalization Aims To Build On Successes Of 2004 Banking Sector Reforms, Says Cardoso

Caption: Philip Ikeazor, Deputy Governor, Financial System Stability (FSS), and representative of the Governor, Central Bank of Nigeria (CBN), represented the Governor, Olayemi Cardoso (middle); Ray Atelly, President and Chairman of Council, Nigerian-British Chamber of Commerce (NBCC), (5th right); and the Deputy Governor, Corporate Services at the CBN, Dr. Bala Bello (4th right), flanked by other participants at the 2024 Trade Mission To The United Kingdom, held on June 25, 2024.

The Governor of the Central Bank of Nigeria (CBN), Mr. Olayemi Cardoso, the ongoing recapitalisation of banks in the country aims to build on the successes and achievements of the successful Banking Sector Reforms to consolidate the industry 20 years ago in 2004.

Reflecting on the gains of that exercise, Cardoso who was addressing the UK-Nigerian Chamber of Commerce in London on Tuesday, June 25, 2024, said it , increased capital bases, and boosted resilience of the banks against the global financial crisis..

He assured that the CBN will continue to partner relevant financial institutions, the fiscal authorities and the National Assembly to ensure that the ongoing recapitalisation exercise is successful, including providing adequate protection of property rights and interests of minority shareholders.

The governor, who spoke on “The Impact of the Recapitalization of Nigerian Banks,” restated the CBN’s commitment to fostering stronger, healthier, and more resilient banks capable of withstanding economic shocks and supporting the Government’s goal of achieving a GDP of US$1 trillion by 2030.

Represented by the Deputy Governor, Financial Systems Stability, Phillip Ikeazor, the CBN boss listed the anticipated impact of the recapitalisation programme to include an increase in banks’ lending capacity, a boost in the volume of foreign direct investment (FDI), and an increase in foreign exchange liquidity.

He said the exercise would also contribute to GDP growth, better risk management, improved credit ratings, a diversified ownership base, better governance and strategic decisions, and increased market volume and value, leading to a more vibrant equity market.

“With the recapitalisation programme, our goal is to trigger the emergence of stronger, healthier and more resilient banks,” he added.

Several factors, he continued, influenced the new minimum capital requirements, including macroeconomic conditions, stress test outcomes, and the need for improved risk management.

“We will rigorously enforce our “fit and proper criteria” for prospective new shareholders, senior management, and board members of banks, and proactively monitor the integrity of financial statements, adequacy of financial resources, and fair valuation of banks’ post-merger balance sheets,” Cardoso assured.

He noted the significant opportunity it presents to engage investors, policymakers, and technocrats on the critical issue of bank recapitalisation in Nigeria.

Cardoso explained that since his assumption of office in October 2023, his priorities at the CBN have included achieving monetary and price stability, maintaining a stable exchange rate, controlling inflation, and creating an enabling environment for businesses.

He explained that the recapitalisation directive excluded retained earnings from the minimum capital requirement to simplify capital calculations and enhance transparency. He elucidated that the decision, rooted in the BOFIA Act 2020, aligns with international standards like Basel III and emphasises core capital elements to improve financial stability.