Don Advocates Increasing Banks’ Capital Base Beyond N25bn

Prof. Ochei Ikpefan of the Covenant University, Ota, Ogun State has called for increase in the N25bn capital base of Nigerian banks to guarantee a thriving banking system. 

This, he added, is to foster efficient operation and survival of the Nigeria banking institutions.

Prof Ikpefan who was the keynote speaker at the 29th inaugural lecture of the institution theme: ‘Securing the financial health of Nigeria Banks Today for the Future’ at the Covenant University Chapel, Ota, Ogun State. 

He alluded that the 2005 recapitalisation of banks minimum capital base from N2 billion to N25 billion changed the financial trajectory with various forms of corporate restructuring in the Nigerian financial environment can be reviewed. 

“An increase from the N25billion in the financial base of banks will put Nigerian banks in a buoyant, financial stance as this propels the financial sustainability to keep on thriving,” he said. 

Ikpefan noted that the precursors of financial crises in the Nigeria banking sector include lowly capital adequacy ratios of banks and non-performing loans are some of the effect of bank failures on the economy.  

While reiterating that performance indicators for the banking sector are to include revenue growth, revenue for clients, profit margin, customer satisfaction, and client retention rate, he emphasised good corporate governance, well aligned with a framework for quality and quantity of the banking sector to enable financial sustainability. 

He urged that the capital of banks should be of high quality and loss-absorbing, as the quality of the capital is determined through the application of the Basel Three sequential banking regulation and financial agreements with key emphasis on capital risk market, risk and operational risk to ensure financial institutions have enough capital to absorb unexpected losses. 

“Adequate bank capital provides a hedge against losses and the only option that is good for the financial performance of our banks is the liquidity-Solvent financially healthy bank,” he said.

The professor recommended that adequate shareholder funds can serve as a veritable stimulant in strengthening the performance of Nigeria’s deposit money banks and heightening customer confidence in an era of global banking. 

In his remark, vice chancellor, Prof.Abiodun Adebayo said, the institution found it noble to present a topical lecture that addresses the fundamental aspect of our national and sustainable economic development.

Adebayo asserted that some challenges that had negatively impacted bank initiatives and customer trust included: poor cooperate governance, higher level of non-performing loans, and inadequate and ineffective online banking facilities, among others.°