Banks recapitalisation will strengthen banks to help economy – Yusuf, LCCI DG

Director General of Lagos Chamber of Commerce and Industry, Muda Yusuf said yesterday that the proposed recapitalisation of Nigerian banks will further strengthen their capacity to support the economy better.

“It would strengthen the capacity of banks to support the economy better, especially with regards to large projects. It will also be beneficial in bolstering the capacity of the banks to withstand macroeconomic shocks”, he noted.

He pointed out, however, that the recapitalisation should be undertaken in the manner that would not inflict disruptions to the banking system.

The Central Bank governor, Godwin Emefiele had during a press conference to unveil the bank’s new road map for the next five years in Abuja yesterday, said the bank plans to raise the capital base of deposit money banks as their capital base is now weak.

“In the next five years, we intend to pursue a programme of recapitalizing the banking industry so as to position Nigerian banks among the top 500 in the world,” Emefiele had said.

“Banks will therefore be required to maintain higher level of capital, as well as liquid assets in order to reduce the impact of an economic crisis on the financial system.

“It was CBN Governor Soludo in 2004 that did the last recapitalisation and moved it from N2bn to N25bn. And I must commend that effort because it resulted in repositioning Nigerian banks not only in Africa but among the top banks in the world in terms of capitalization. It also deepened the banking industry’s capacity to do large ticket transactions and those are some of the things we badly need today.

“If you relate N25bn with 2004 exchange rate which was around N100/$1, it will be around $200 million. Today if you relate N25bn at N360/$1, you will see that it is substantially even lower than $75 million.

“What we are trying to say is that the capitalization has weakened substantially and it is time for us to recapitalize the banks again. It is a policy thrust which will be discussed at the committee of governors meeting and of course a framework for the recapitalisation of Nigerian banks will be unfolded for the whole world to see.

Emefiele said the CBN intends to focus on developing robust security architecture to protect bank customers.

“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,” he said.

Speaking on cashless policy, he noted that, “we will reinvigorate our efforts at driving the cashless initiative across the country, due to the immense efficiency gains that will be derived from it, and the impact it could have on our financial inclusion drive.

“We will continue to work to safeguard the stability of our financial system, while supporting the development of a payment system infrastructure that will improve access to credit for all eligible Nigerians.

“Nevertheless, additional emphasis will be placed on supporting greater growth of our economy and in reducing unemployment through targeted interventions in the agricultural and manufacturing sectors.”

The CBN governor, did not, however, say how much the banks will be required to capitalise to.