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Emefiele: Nigerian banks to be recapitalised



Emefiele: Nigerian banks to be recapitalised
  • CBN targets double growth, $12bn non-oil export revenue
  • External reserves now $45bn
  • Bank to sustain float exchange rate regime



The Central Bank of Nigeria (CBN) has announced that it will pursue a programme of recapitalising the banking industry to ensure that the country’s lenders rank among the top 500 banks in the world. CBN Governor, Mr. Godwin Emefiele, disclosed this in Abuja yesterday while unveiling his agenda for his second term in office. Specifically, he said the recapitalisation of Nigerian banks was long overdue because the last time such an exercise was carried out was in 2004 under the then CBN Governor, Prof. Charles Soludo, when the capital base of lenders was raised from N2 billion to N25 billion.
“In the next five years, we intend to pursue a programme 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 higher level of capital, as well as liquid assets in order to reduce the impact of an economic crisis on the financial system,” Emefiele said.
He also noted that the last recapitalisation exercise “resulted in positioning Nigerian banks, not only in Africa, but also being among the top banks in the world in terms of capitalisation and also helped to increase and strengthen the lenders’ capacity to take on large ticket transactions. Those are some of the things we badly need today.”
CBN Governor said: “If you relate it, N25 billion in 2004 exchange rate, which was about N100/$, N25 billion, is almost about $200 million today, if you relate N25 billion at N360/$, you can see that it is substantially lower than $75 million. So, what we are trying to say is that the capitalisation has weakened quite substantially, and there is a need for us to say that it is time to recapitalize Nigerian banks again.”
He said CBN will sustain its surveillance on banks for financial system stability.
“We will continue to improve our onsite 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,” he said.
Besides, he said the banking watchdog will continue to operate a managed float exchange rate regime to reduce the impact of continuous volatility in the exchange rate on the economy.
Emefiele said that the bank would support measures that would increase and diversify Nigeria’s export base and ultimately help in shoring up the reserves.
He pointed out that the series of measures introduced by the CBN during his first term in office led to the recovery of the economy from the recession by the first quarter of 2017 and the external reserves rising from $23 billion in October 2016 to over $45 billion by June 2019.
The measures, he added, also helped to curb inflation, which dropped from 18.72 per cent in January 2017 to 11.40 per cent in May 2019.
According to him, the apex bank’s ultimate objective is to ensure that 95 per cent of eligible Nigerians have access to financial services by 2024.
The Governor, however, noted that Nigeria’s pace of economic growth remains fragile, but added that the CBN would work with the fiscal authorities to achieve double digit growth by the next five years.
Furthermore, he said the CBN would strive to decrease the inflation rate to single digits and maintain a positive interest rate.
He said: “Working closely with our fiscal authorities, we pledge to target a double digit growth by the next five years and at the CBN, we commit to working assiduously to bringing down inflation to single digit.”
Emefiele said while the dynamics of global trade continued to evolve in advanced economies, Nigeria remained committed to a free trade regime that was mutually beneficial.
“We intend to aggressively implement our N500 billion facility aimed at supporting the growth of our non-oil exports, which will help to improve non-oil export earnings.
“We will launch a Trade Monitoring System in October, which is an automated system that will reduce the length of time required to process export documents from one week to a day,” he said.
According to him, this measure will help support the bank’s efforts at improving Nigeria’s non-oil exports of goods and services.
“We will also work with our counterparts in the fiscal arm in supporting improved Foreign Direct Investment flows to various sectors such as agriculture, manufacturing, insurance and infrastructure,” he said. “These measures, while supporting improved inflows into the country, will help to stabilise our exchange rate and build our external reserves.”
According to the CBN Governor, the measures that will be introduced during his second term “will help to boost not only our domestic outputs, but also improve our annual non-oil exports receipts from $2 billion in 2018 to $12 billion by 2023.”
In order to boost consumer lending, Emefiele said a lending framework will be announced by the CBN, under which large departmental stores, automobile companies, equipment leasing companies, in partnership with financial institutions, and the credit bureaus, will be able to provide credit facilities at reasonable interest rates to consumers.
He also disclosed that as part of efforts to boost mortgage lending, the banking watchdog will develop a framework that will enable banks to securitize mortgage loans, which can then be sold in the capital markets.

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