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CBN to recapitalise Nigerian banks, eyes world top 500 in five years
GODWIN Emefiele, Governor of the Central Bank of Nigeria, on Monday unveiled the monetary policy roadmap for his 2019-2024 economic plan for the country, promising to recapitalise banks within the next five years to make them contribute significantly to economic growth and compete on a worldwide platform.
During a media briefing held at the apex bank headquarters in Abuja, Emefiele said he would work with Deposit Money Banks in the next five years to ensure financial system stability while boosting credit to the real sector as well as the creative and education sector.
“We will continue to improve our on-site and off-site supervision of all financial institutions, while leveraging on data analytics and our in-house experts across different sectors, to improve our ability to identify potential risks to the financial system as well as risks to individual banks.
“In the next five years, we intend to pursue a program of recapitalising 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.”
In mid-2008, the global financial crisis had an adverse effect on both the oil and gas sector and the Nigerian capital markets. A sharp deterioration in the quality of banks’ assets followed, which immediately led to liquidity constraints across all the banks.
Concerned about the state of some of the Nigerian banks and the overall stability of the financial system, the Central Bank of Nigeria (CBN), commissioned special examinations on all 24 banks in Nigeria.
The examination showed clearly that nine banks were in ‘grave situation’. They were Oceanic Bank International Nigeria Plc, Union Bank of Nigeria Plc, Intercontinental Bank Plc, Bank PHB Plc, Afribank Nigeria Plc, Finbank Plc, Equitorial Trust Bank Ltd, Spring Bank Plc and Wema Bank Plc. A tenth bank, Unity Bank, was not deemed to be in grave danger, but still declared to have insufficient capital and unacceptable levels of non-performing loans (NPLs).
Recapitalization which is the process of restructuring a company’s debt and equity mixture is often a measure taken make a company’s capital structure more stable.
Some of the proactive measures undertaken by CBN under the leadership of Sanusi Lamido Sanusi, former governor of the Apex bank were to prevent further deterioration instead of revoking licenses or handing the banks over to the Nigerian Deposit Insurance Corporation (NDIC). CBN injected N620bn as a convertible loan that amounts to Tier II capital into the affected banks.
Second, it replaced the chief executives and executive directors of eight of the banks with competent managers with experience and integrity, and finally, introduced the guarantee of the local interbank market to ensure continued liquidity for all banks and guaranteed foreign creditors and correspondent banks’ credit lines to ensure confidence and maintain important correspondent banking relationships.
In addition to preserving domestic macroeconomic and financial stability, Emefiele also said the CBN would foster the development of a robust payments system infrastructure that will increase access to finance for all Nigerians, continue to work with the Deposit Money Banks to improve access to credit for not only smallholder farmers and MSMEs but also consumer credit and mortgage facilities for bank customers, grow the nation’s external reserves.
Lastly, CBN will support efforts at diversifying the economy through the various intervention programs in the agriculture and manufacturing sectors.