- CBN to Embark on Another Recapitalisation Program
In a move to reposition Nigerian banks among global counterparts, the Central Bank of Nigeria on Monday announced it would pursue bank recapitalisation in the next five years.
The information was revealed by Mr. Godwn Emefiele, the governor of the CBN, during the declaration of policy direction for his second term in office in Abuja on Monday.
According to the governor, a stable financial system is imperative for the continuous growth of the Nigerian economy.
Therefore, the apex bank will leverage on data analytics and in-house experts to monitor and identify potential financial risks to the system.
In the same vein, the central bank will embark on banks’ recapitalisation to reposition Nigerian banks among the top 500 in the world. Henceforth, financial institutions will be required to maintain a higher level of capital and liquidity assets in order to reduce the impact of an economic crisis.
“We intend to pursue a program of recapitalizing the Banking Industry so as to position Nigerian banks among the top 500 in the world.”
“Banks will, therefore, be required to maintain a higher level of capital, as well as liquid assets in order to reduce the impact of an economic crisis on the financial system,” the governor stated.
He also said: “With the rise in digital payments and cyber security threats, we will develop a robust mechanism that will help ensure that the necessary safeguards are put in place by banks and financial institutions to protect against loss of data, fraud and cyber incursions in their respective systems.”
The banking industry was recapitalised in 2004 under the leadership of Professor Chukwuma Soludo as the governor.
The minimum capital for banks operating in Nigeria then was raised from N1 billion for existing banks and N2 billion for new entrants to N25 billion, forcing most financial institutions into mergers to reduce Nigerian banks to 25.
While the recapitalisation was meant to strengthen the banking sector and improve its contribution to the economy, the reverse is the case as more financial institutions have been bailed out by the central bank since the last recapitalisation, pushing CBN injection into the sector to more than N3 trillion and N5.4 trillion for AMCON.
In 2018, CBN injected N786 billion into Polaris bank, the defunct Skye Bank, with the hope of selling the embattled bank to recover the injected fund. A year later, no buyer insight as other economic issues continued to hurt economic outlook and investment interests.