Recapitalisation Will Create Stronger, More Resilient Banks – Cardoso

The governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, has said that the Bank will continue to collaborate with relevant financial institutions, the fiscal authorities and the National Assembly to ensure a successful recapitalisation exercise, including providing adequate protection of property rights and interests of minority shareholders.

Cardoso made the pledge in London on Tuesday, June 25, 2024, while speaking to stakeholders on “The Impact of the Recapitalisation of Nigerian Banks” at the UK-Nigerian Chamber of Commerce.

The governor, represented by the bank’s deputy governor, financial systems stability, Phillip Ikeazor, emphasised the event’s significance and restated the CBN’s commitment to fostering stronger, healthier, and more resilient banks capable of withstanding economic shocks and supporting the Government’s goal of achieving a GDP of US$1 trillion by 2030.

According to him, the anticipated impact of the recapitalisation programme will include an increase in banks’ lending capacity, a boost in the volume of foreign direct investment (FDI), and an increase in foreign exchange liquidity.

He said the exercise would also contribute to GDP growth, better risk management, improved credit ratings, a diversified ownership base, better governance and strategic decisions, and increased market volume and value, leading to a more vibrant equity market.

“With the recapitalisation programme, our goal is to trigger the emergence of stronger, healthier and more resilient banks,” he added.

He noted that several factors influenced the new minimum capital requirements, including macroeconomic conditions, stress test outcomes, and the need for improved risk management.

“We will rigorously enforce our “fit and proper criteria” for prospective new shareholders, senior management, and board members of banks, and proactively monitor the integrity of financial statements, adequacy of financial resources, and fair valuation of banks’ post-merger balance sheets,” Cardoso assured.

He noted the significant opportunity it presents to engage investors, policymakers, and technocrats on the critical issue of bank recapitalisation in Nigeria.

Cardoso explained that since his assumption of office in October 2023, his priorities at the CBN have included achieving monetary and price stability, maintaining a stable exchange rate, controlling inflation, and creating an enabling environment for businesses.

He explained that the recapitalisation directive excluded retained earnings from the minimum capital requirement to simplify capital calculations and enhance transparency. He elucidated that the decision, rooted in the BOFIA Act 2020, aligns with international standards like Basel III and emphasises core capital elements to improve financial stability.

Reflecting on the successful 2004/5 Banking Sector Reforms, which consolidated the industry, increased capital bases, and boosted resilience against the global financial crisis, the Governor assured that the current recapitalisation initiative aims to build on these achievements.