CBN Governor, Olayemi Cardoso
Recapitalisation will make Nigerian banks compete globally, strengthen financial system – Cardoso
LAGOS — The Central Bank of Nigeria, CBN, insisted weekend that further capitalisation of banks in the country was for the common good of the nation.
CBN governor, Dr Olayemi Cardoso, stated this at the launch of the book, “Power of One Man,” written by Dr. Ray Echebiri.
Cardoso, represented at the event by Mr Philip Ikeazor, Deputy Governor, Financial System Stability Directorate, said: “Incidentally, the current manifesto of the Central Bank has embarked on another round of banking consolidation.
‘Why consolidation is necessary’
“Why was it necessary then? Professor Soludo wanted to make the banks robust, resilient, and fit for purpose to grow the economy. And that is exactly the same reason we are embarking on a similar journey today.
“Again, I think by coincidence, if you check the quantum of the capital, minimum capital levels that we require, it’s pretty similar, because international banks are moving from N50 billion to N500 billion, which is 10 times, similar to Soludo’s 12 and a half times, and national banks are moving from N25 billion to N200 billion, roughly about eight times. Why would you think this is the quantum leap? “Basically, when you do consolidations, you would look at the macroeconomic headwinds, the macroeconomic conditions on ground, and, of course, apply your stress tests. And when you apply stress tests today, which I’m sure some of the big banks have done, they would have taken a guess where the capital levels were going to land.
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“If you compare the bank assets in Nigeria to GDP, and compare it to similar economies in Africa, you can see they were way behind. So, this exercise is also to strengthen the financial system, make it robust to be able to meet the expected headwinds.
“Remember that when the current administration came into place, there was unification of FX rates, and there was removal of fuel subsidies. And the impact on the economy, the manufacturing sector, is beginning to manifest, or has started manifesting in 2024, and will continue over the next few years.
“So it is important that the banks were recapitalized to the level where they’ll be able to absorb any shocks that come, and also position the banks to be able to grow the economy.
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