Nigerian banks brace for fresh recapitalisation

* Recapitalisation will improve consumer confidence in banking industry –Stakeholders

Isola Moses

Nigerian commercial banks are apparently preparing ahead of a possible announcement of a new recapitalisation in 2020.

It is recalled that Mr. Godwin Emefiele, Governor of the Central Bank of Nigeria (CBN), in his five-year economic blueprint unveiled in June 2019, had unfolded plans to recapitalise the nation’s banks in five years.

The objective of the exercise, according to him, is to make these financial institutions to contribute significantly to economic growth.

ConsumerConnect learnt that most banks have gone far beyond the N25billion minimum capital requirement, and are planning strategies to raise Tier 2 capital so as not to be caught unawares in the plausible fresh recpitalisation.

As part of this strategy, reports say one of the bank’s Chief Executive Officers (CEOs), who preferred anonymity said that his bank would raise N500billion Eurobond this year.

The financial institutions had braced up for an imminent recapitalisation by the Apex bank.

“It is something we are all looking forward to, and we are already working towards that,” the CEO, who pleaded to remain anonymous, said.

ThisDay reports that Dr. Uche Olowu, President, Chartered Institute of Bankers of Nigeria (CIBN), said: “Down the line, the banks are also preparing to beef up their capital because that is something that should happen this year.

We expect the regulators to come out with an announcement because we need the financial system to be more stable, especially now that we are now into major infrastructural development.

“And as they are supporting financial inclusion, they need to beef up their capital. I support that.

“I don’t know the mind of the regulators on how they intend to go about it. But if you ask me, they should categorise the banks,” he submitted.

Olowu further indicated that recapitalising the bank would further improve confidence in the banking industry.

If their capital base increases, they would be able to support the economy more,” he added.

However, Mr. Kunle Ezun, an analyst at Ecobank Nigeria Limited, clarified that currently, most of the banks are planning strategies on how best to raise Tier 2 capital.

“For the major banks, many of them are planning to do Eurobond, or to get capital injection from investors ahead of any announcement,” he said.

Prof. Chukwuma Soludo, a former Governor of CBN, recently was reported to have disclosed that the total size of Nigerian banks’ assets, which was N43.7trillion as of half-year 2019, was low, compared to the banking sector in some other African countries.

“When we started, it was just about N1 trillion, before the banking consolidation.

“So, if you look at it from where we were before the consolidation, it was a massive change.

“But the banking total assets and all we say about their size are still too small.

“Let us look at where we are, in terms of the size, in comparison to African countries, in terms of ranking of banks’ asset size as a percentage of GDP,” he said.

He satated that he “was shocked to find out that our banks are far low, even by African standard. Countries such as Cape Verde, Mauritius, Kenya, Senegal and Ghana are much higher than us.”

According to Soludo, the dream is for Nigeria to become Africa’s financial and banking centre by creating a banking and financial sector that will make the economy stronger.

“Now that we are actually integrating Africa to have a continental free trade area, what kind of banking and financial system do we really need to be able to move this economy, which is the largest in Africa?

“The question is what should be the next level for the banking sector? And what should be the type of disruptive changes that need to occur, to be able to move the sector, to that level that it would be able to power the Nigerian economy and increasingly, the African economy,” he added.

Prof. Soludo, a member of President Muhammadu Buhari’s Economic Advisory Council, (EAC) has emphasised the need for banks to be able to finance large-ticket transactions on the African continent.