CBN set to initiate fresh recapitalisation for banks in Nigeria

A new wave of banking recapitalization for the Deposit Money Banks (DMBs) is planned, according to the Central Bank of Nigeria (CBN).

This was declared at the 58th Annual Bankers’ Dinner, which was held on Friday night in Lagos and hosted by the Chartered Institute of Bankers of Nigeria (CIBN), by Mr. Olayemi Cardoso, the governor of the CBN.

According to the News Agency of Nigeria (NAN), DMBs will need to raise more money in order to meet the demands of Nigeria’s economy as a result of the planned recapitalization.

Cardoso pointed out that President Bola Tinubu had set an ambitious target of reaching a GDP of $1 trillion by 2030, with specific strategies and key areas, in his Policy Advisory Council report on the country’s economy.

He believes that banks must have a part in the economy, which is expected to grow to be worth one trillion dollars by 2030.

Cardoso stated that it was now necessary to require the recapitalization of the banks due to the significant developmental role that the apex bank would like the banks to play in the following seven years.

Cardoso stated that Nigeria’s economy needed to grow more quickly and inclusively in order to meet the goal.

Through fiscal measures, such as the elimination of petrol subsidies and the unification of the foreign exchange market rate, the administration has already started this path.

It is vital that we assess whether our banking sector is sufficiently suited to support the larger economy as envisaged, given the policy imperatives and the anticipated rate of expansion.

“As we’ve already established, the current assessment demonstrates stability, but it goes beyond the financial system’s current stability.

But we must ask ourselves, will Nigerian banks have enough capital in the near future to support a $1.0 trillion economy in comparison to the demands of the financial system? The answer, in my opinion, is “No!” until we do anything.

As a result, we have to make tough choices on capital sufficiency. We will be ordering banks to raise their capital as a starting step’, he declared.

In addition, the CBN governor declared that a new round of Open Market Operations (OMOs) to remove excess liquidity from the banking sector has been approved.

The primary tool for monetary policy is the open market operations (OMOs), whereby the central bank engages in buys or sales of securities with financial institutions to affect the money supply and/or interest rates.

“An OMO auction with a stop rate of 17.5% for the one-year tenor was recently held,” Cardoso stated, drawing N350 billion in oversubscription.

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“In order to further reduce surplus liquidity, another round of OMO has been approved.

Offering the investing public Treasury Bills with three tenors for N108.1 billion, which can enhance government fundraising efforts and help the banking system’s liquidity.

Cardoso declared that the central bank would maintain low and steady inflation using its tools for monetary policy.

“The Central Bank of Nigeria is committed to achieving price and monetary stability,” he declared. This is not only a theoretical goal; it also affects our residents’ well-being in the real world.

“We can ensure a more stable exchange rate, control inflation, and create an enabling environment for businesses and individuals to thrive through targeted policies, transparent market operations, and coordination between monetary and fiscal authorities.”

In order to increase the influence of its policy decisions on the economy, he pointed out that the apex bank has strengthened the transmission mechanism and improved the efficiency of its monetary policy tools.

Cardoso continued, “The channels through which monetary policy was transmitted had become disrupted, which weakened the ability of the monetary policy committee to influence the economy through its decisions.”

The governor of the CBN said that the central bank would be creating new policies and laws to amend the nation’s foreign currency laws.

Before making any final decisions, he said, banks and foreign exchange companies would be consulted.