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CBN Plans Fresh Banks’ Recapitalisation As Capital Base Weakens By $3.5bn - Business - Nairaland

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CBN Plans Fresh Banks’ Recapitalisation As Capital Base Weakens By $3.5bn by Pamatips: 5:10am On Jun 25, 2019
The depreciation of the naira between 2004 when the last banking sector recapitalisation took place and now has cut the value of the capital of each Deposit Money Bank by about $175m.

The recapitalisation of the banking sector, which was done in 2005, required the banks to raise their capital base from N2bn to N25bn.



The exercise then saw the emergence of 24 Deposit Money Banks following the merger of some of them as well as the acquisition of many that could not raise the required capital.

Speaking on Monday in Abuja during the unveiling of his economic agenda for the next five years, the CBN Governor, Mr Godwin Emefiele, noted that the drop in the value of the naira to the dollar had weakened the capital of banks.

For instance, the apex bank boss recalled that in 2004 when the banks were last asked to recapitalise, the value of a dollar to the naira was about N100.

This, he explained, meant that the N25bn capital base of banks when translated into the dollar was about $250m.

However, due to the drop in the value of the nation’s currency which now exchanges for N360 to a dollar, the governor put the translated value of N25bn at just about $75m.

Going by this, it, therefore, means that the value of the capital of each bank had been reduced by $175m.

Based on the number of Deposit Money Banks in the country which stands at 20, the total value of the capital base may have been eroded by about $3.5bn.

Emefiele said going by the huge developmental role the apex bank would want the banks to play in the next five years, it had become imperative to demand their recapitalisation.



Following the announcement of the recapitalisation exercise, Emefiele said the Committee of Governors of the CBN would meet to discuss the new policy.

The meeting is expected to discuss modalities for the recapitalisation exercise as well as approve the framework that would guide the implementation of the policy.

The CBN governor said during the unveiling of his agenda for the next five years that the recapitalisation of banks had become imperative as their current capital could no longer finance large transactions.

He said, “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 a higher level of capital, as well as liquid assets in order to reduce the impact of an economic crisis on the financial system.

“Recall that it was Governor (Chukwuma) Soludo in 2004 that did the last recapitalisation we had. He moved the capitalisation from N2bn to N25bn. And I must commend those efforts because it resulted in positioning Nigerian banks not only in Africa but among the top banks in the world in terms of capitalisation.

“It also helps to increase the banking industry’s capacity to take on large transactions. And those are some of the things we badly need today.

“So if you relate N25bn with 2004 exchange rate which was about N100 (to a dollar), N25bn was about $250m. Today, if you relate N25bn at N360 (to a dollar) you will see that it is substantially lower than $75m.

“So what we are trying to say is that the recapitalisation has weakened and there is a need for us to say it is time to recapitalise the banks again.

“It’s a policy thrust which would be discussed at the committee of governors’ meeting and of course, the framework for the recapitalisation of Nigerian banks would be unfolded for the whole world in due course.”

Commenting on the development, the President, Chartered Institute of Bankers of Nigeria, Dr Uche Olowu, said that there was no need for people to panic or have any fear about the financial system.

He said that the announcement of an intending capital increase in the banking sector was a welcome development.

“Ordinarily, in other climes, you continue to look at the risks that you will take because of the opportunities that you see in them. You ask them to recapitalise because of the opportunities that will come. We need to beef up the capital base.” he said.

He said that some banks were moving into the regional regions and needed to shore up their capital to beef up more confidence.

He stated, “Even with the latest International Financial Reporting Standard, it also affects capital. So it is important that they begin to address it based on their capital base.

“If you are raising your capital, it is based on the risk you are taking. Capital is a function of the business that you want to do. There is already a minimum capital, if you now feel you want to do more, it is a function of the risk you want to take.”

Providing more insights on his economic agenda which centred on five major priorities, the CBN governor said he would work closely with the fiscal authorities to achieve double-digit growth rate within the next five years.

He said during his second term in office, his first priority would be to ensure domestic macroeconomic and financial stability.

This, he said, would be followed by the need to foster the development of a robust payment system infrastructure that would increase access to finance for all Nigerians thereby raising the financial inclusion rate in the country.

The governor said his third priority would be to continue to work with Deposit Money Banks to improve access to credit for not only smallholder farmers and Micro, Small and Medium Enterprises, but also consumer credit and mortgage facilities for bank customers.

Emefiele said the CBN’s intervention support would also be extended to the youth population who possessed entrepreneurship skills in the creative industry.

During this intervention period, the apex bank boss said the CBN would encourage Deposit Money Banks to focus more on supporting the education sector.

On his fourth priority, he said the focus here would be to grow the country’s external reserves, adding that his fifth priority would be to support efforts at diversifying the economy through the CBN’s intervention programmes in the agriculture and manufacturing sectors.

“We are confident that when implemented, these measures will help to insulate our economy from potential shocks in the global economy.

“In my second term in office, part of my pledge is to work to the best of my abilities in fulfilling these objectives,” he added.

Speaking on strategies to achieving these priorities, Emefiele said the CBN would implement its agenda under various initiatives.

This, he noted, would enable the bank to achieve macroeconomic stability, exchange rate stability, financial system stability, financial inclusion, access to credit, lending to MSMEs, consumer credit and mortgage lending among others.

Macroeconomic stability

In the area of macroeconomic stability, the CBN governor said, “We intend to leverage monetary policy tools in supporting a low inflation environment while seeking to maintain stability in our exchange rate.

“As a result, decisions by the Monetary Policy Committee on inflation and interest rates will be dependent on insights generated from data on key economic variables.”

Working with other stakeholders, he said the bank intended to bring down the cost of food items, which had considerable weight in the Consumer Price Index basket.

He said, “Our ultimate objective is to anchor the public’s inflation expectation at single digit in the medium to long run.

“We believe a low and stable inflationary environment is essential to the growth of our economy because it will help support long term planning by individuals and businesses.

“It will also help to lower interest rates charged by banks to businesses thereby facilitating improved access to credit, and a corresponding growth in output and employment.”

Exchange rate stability

In achieving exchange rate stability, Emefiele said the apex bank would continue to operate a managed float exchange rate regime in order to reduce the impact which continuous volatility in the exchange rate could have on the economy.

He said, “We will support measures that will increase and diversify Nigeria’s exports base and ultimately help in shoring up our reserves.

“While the dynamics of global trade continues to evolve in advanced economies, Nigeria remains committed to a free trade regime that is mutually beneficial but particularly aimed at supporting our domestic industries and creating jobs on a mass scale for Nigerians.

“We intend to aggressively implement our N500bn facility aimed at supporting the growth of our non-oil exports, which will help to improve non-oil export earnings.”

He said the CBN would launch a Trade Monitoring System in October this year which is an automated system that would reduce the length of time required to process export documents from one week to one day.

Financial system stability

On financial system stability, the apex bank boss said the CBN would continue to improve its onsite and off-site supervision of all financial institutions, while leveraging data analytics and in-house experts across different sectors, to improve its ability to identify potential risks to the financial system as well as risks to individual banks.

Development finance

Emefiele said in keeping with the recent Presidential Directives, he intended to boost productivity growth through the provision of improved seedlings, as well as access to finance for rural farmers in the agricultural sector, across 10 different commodities namely rice, maize, cassava, cocoa, tomato, cotton, oil-palm, poultry, fish, and livestock/dairy.

“We believe these measures will help to boost not only our domestic outputs but also improve our annual non-oil exports receipts from $2bn in 2018 to $12bn by 2023,” he added.

Financial inclusion

In the area of financial inclusion, Emefiele said over the next five years, through initiatives and policy measures such as the Shared Agent Network and the payment service banks, he intended to broaden access to financial services to individuals in underserved parts of the country.

Source: https://punchng.com/cbn-plans-fresh-banks-recapitalisation-as-capital-base-weakens-by-3-5bn/

5 Likes

Re: CBN Plans Fresh Banks’ Recapitalisation As Capital Base Weakens By $3.5bn by gr8keeng: 5:22am On Jun 25, 2019
post too long abeg...long story cut short, the post simply means CBN wan increase the capital base of the banks to between 35 billion to 230 billion naira so naija banks can compete with the top 500 banks in the world... lobatan

23 Likes 3 Shares

Re: CBN Plans Fresh Banks’ Recapitalisation As Capital Base Weakens By $3.5bn by ayusco85(m): 5:42am On Jun 25, 2019
For the lazy readers like the guy above me, here is the reason why CBN decided this recapitalization

"Speaking on strategies to achieving these priorities, Emefiele said the CBN would implement its agenda under various initiatives.

This, he noted, would enable the bank to achieve macroeconomic stability, exchange rate stability, financial system stability, financial inclusion, access to credit, lending to MSMEs, consumer credit and mortgage lending among others.".

8 Likes

Re: CBN Plans Fresh Banks’ Recapitalisation As Capital Base Weakens By $3.5bn by MANNABBQGRILLS: 5:42am On Jun 25, 2019
Anything for our money to be secure is all that matters.

12 Likes 4 Shares

Re: CBN Plans Fresh Banks’ Recapitalisation As Capital Base Weakens By $3.5bn by ayusco85(m): 5:42am On Jun 25, 2019
gr8keeng:
post too long abeg...

What a lazy student you are. Hustling for FTC but doesn't care about the content.

17 Likes 1 Share

Re: CBN Plans Fresh Banks’ Recapitalisation As Capital Base Weakens By $3.5bn by helinues: 5:43am On Jun 25, 2019
Summary in a lay man language pls

2 Likes

Re: CBN Plans Fresh Banks’ Recapitalisation As Capital Base Weakens By $3.5bn by Hotfreezers: 5:44am On Jun 25, 2019
gr8keeng:
post too long abeg...

It is not that the post is too long, you have a short attention span.

Try to engage in more reading activities to build up your reading capabilities.

22 Likes

Re: CBN Plans Fresh Banks’ Recapitalisation As Capital Base Weakens By $3.5bn by Godjone(m): 5:45am On Jun 25, 2019
Weak naira. Weak President. Weak country

8 Likes 1 Share

Re: CBN Plans Fresh Banks’ Recapitalisation As Capital Base Weakens By $3.5bn by Hotfreezers: 5:46am On Jun 25, 2019
If you hear your name, come out here.

Heritage Bank
Fidelity Bank
Jaiz Bank
Unity Bank
Polaris Bank
Sterling Bank
Keystone Bank

37 Likes 1 Share

Re: CBN Plans Fresh Banks’ Recapitalisation As Capital Base Weakens By $3.5bn by ayusco85(m): 5:46am On Jun 25, 2019
Hotfreezers:


It is not that the post is too long, you have a short attention span.

Try to engage in more reading activities to build up your reading capabilities.

Oil dey your head jare.

13 Likes

Re: CBN Plans Fresh Banks’ Recapitalisation As Capital Base Weakens By $3.5bn by tunwumi: 5:48am On Jun 25, 2019
Just say you want to continue the policy of Soludo which you have found unbeatable. He has said it will be 100B in 15years. What will have been right is to acknowledge his foresight and intellectuality.


We will only be left with just 5 banks.

First Bank

GTB

Access

Zenith bank

Other Banks

18 Likes

Re: CBN Plans Fresh Banks’ Recapitalisation As Capital Base Weakens By $3.5bn by Hotfreezers: 5:50am On Jun 25, 2019
tunwumi:
We will only be left with just 5 banks

Sure banker
2 Direct
Central Bank
Blood Bank
River Bank

Seriously though, outside the FUGAZ, I feel other banks would survive. Stanbic, FCMB, Union, Citi Bank and Stanchart for example.

5 Likes

Re: CBN Plans Fresh Banks’ Recapitalisation As Capital Base Weakens By $3.5bn by Missperplexity0(f): 5:50am On Jun 25, 2019
I need help with a job in lagos or donation to start a little business, help a sister in need.....3022388333 POLARIS
Re: CBN Plans Fresh Banks’ Recapitalisation As Capital Base Weakens By $3.5bn by ShenTeh(m): 5:54am On Jun 25, 2019
I know at least 3 banks whose camels I suspect would need more than pure luck to pass through the eye of this needle.

And by the way, we hope Governor Emefiele is not trying to recoup the N500bn lost to the 'Dubai' investors' in that infamous failed deal exposed by Sahara Reporters. I hope not.

2 Likes

Re: CBN Plans Fresh Banks’ Recapitalisation As Capital Base Weakens By $3.5bn by lonelydora: 5:56am On Jun 25, 2019
Haa! Time to pull out and invest. Well, I trust StanbicIBTC bank.

1 Like

Re: CBN Plans Fresh Banks’ Recapitalisation As Capital Base Weakens By $3.5bn by Acermoon(m): 6:00am On Jun 25, 2019
Political parties should be recapitalised too

2 Likes

Re: CBN Plans Fresh Banks’ Recapitalisation As Capital Base Weakens By $3.5bn by israelmao(m): 6:01am On Jun 25, 2019
The minnow banks should brace up for more challenges but even before now there has been mergers and acquisitions and the weak links in banking industry have been faced out.
Re: CBN Plans Fresh Banks’ Recapitalisation As Capital Base Weakens By $3.5bn by VisibleDreamz: 6:01am On Jun 25, 2019
Good development
Re: CBN Plans Fresh Banks’ Recapitalisation As Capital Base Weakens By $3.5bn by lekeling04(m): 6:02am On Jun 25, 2019
Nice one
Re: CBN Plans Fresh Banks’ Recapitalisation As Capital Base Weakens By $3.5bn by ponpin234(m): 6:04am On Jun 25, 2019
lonelydora:
Haa! Time to pull out and invest. Well, I trust StanbicIBTC bank.

Invest in what areas?? grin
Re: CBN Plans Fresh Banks’ Recapitalisation As Capital Base Weakens By $3.5bn by lonelydora: 6:05am On Jun 25, 2019
ponpin234:


Invest in what areas?? grin

E plenty ooo.
Re: CBN Plans Fresh Banks’ Recapitalisation As Capital Base Weakens By $3.5bn by Ijawwomaninoyo: 6:06am On Jun 25, 2019
Hotfreezers:


It is not that the post is too long, you have a short attention span.

Try to engage in more reading activities to build up your reading capabilities.

Anything you don't want Nigerians to know or any valuable you want to keep, put it in a book, Nigerians don't like to read.
Can he ask anyone to summarize Tonto or Regina's story?

5 Likes 1 Share

Re: CBN Plans Fresh Banks’ Recapitalisation As Capital Base Weakens By $3.5bn by Patrioticman007(m): 6:08am On Jun 25, 2019
The CBN Boss wants to monopolize Nigeria's Banking sector only to his former employer called zenith Bank.
Hope the retrenchment it will cause in job losses won't crash the economy. If Bankers turn to electronic fraud as a result of the job losses. That's when Efcc turns to ( V.V.G) Village vigilante Groups, Lord protect us from ourselves.

3 Likes 1 Share

Re: CBN Plans Fresh Banks’ Recapitalisation As Capital Base Weakens By $3.5bn by Nobody: 6:10am On Jun 25, 2019
Nigerian banks no strong


Small companies for Europe gp buy them
Re: CBN Plans Fresh Banks’ Recapitalisation As Capital Base Weakens By $3.5bn by Amuocha: 6:13am On Jun 25, 2019
Sai Buhari

2 Likes

Re: CBN Plans Fresh Banks’ Recapitalisation As Capital Base Weakens By $3.5bn by eagleae7(m): 6:15am On Jun 25, 2019
This is good so long our money is safe, but who made the naira this weak angry, just imagine how they're comparing the capital base of banks based on the rate at which dollar was from 2004 vs now.

FG should also compare dollar rate then vs now while taking decision on Workers payment, welfare et al. While the politicians enjoy huge wage, great number of Nigerians live below $1 a day.

Image how long it took to upgrade the minimum wage, compare their wage then vs now with dollar then vs now.

God bless Nigeria
God bless good people
God give our leaders understanding and wisdom to lead.

6 Likes 1 Share

Re: CBN Plans Fresh Banks’ Recapitalisation As Capital Base Weakens By $3.5bn by iamawara(m): 6:20am On Jun 25, 2019
Another merger

1 Like

Re: CBN Plans Fresh Banks’ Recapitalisation As Capital Base Weakens By $3.5bn by Mak4web(m): 6:21am On Jun 25, 2019
okay
Re: CBN Plans Fresh Banks’ Recapitalisation As Capital Base Weakens By $3.5bn by Nbote(m): 6:22am On Jun 25, 2019
Time to merge all those banks with their names like supermarkets. There are some dem I only remember exists wen I run into their branch given somewhere in capital cities
Re: CBN Plans Fresh Banks’ Recapitalisation As Capital Base Weakens By $3.5bn by topedoski(m): 6:23am On Jun 25, 2019
why wud a country have a single thousand naira note?
Re: CBN Plans Fresh Banks’ Recapitalisation As Capital Base Weakens By $3.5bn by 9jaRealist: 6:24am On Jun 25, 2019
All of the big banks have long ago surpassed any effect of currency devaluations on their capital base, as the likes of Zenith, GTBank, Access, First Bank and UBA each have shareholders funds well in excess of US$1 billion.
>
Re: CBN Plans Fresh Banks’ Recapitalisation As Capital Base Weakens By $3.5bn by UNGOBACK: 6:25am On Jun 25, 2019
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