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$1Trn Economy: Why Nigerian banks should recapitalise, operate within licence obligations –CBN

Dr. Olayemi Cardoso, Governor of CBN

*Dr. Olayemi Cardoso, Governor of Central Bank of Nigeria, warns banks that ‘intentional or unintended non-compliance’ with regulations will attract sanctions, as such financial institutions are expected to ensure they undertake activities in line with their licence obligations in the country’s ecosystem

Gbenga Kayode | ConsumerConnect

The Central Bank of Nigeria (CBN) has said it  plans to increase the capital base of banks in the country.

ConsumerConnect reports Dr. Olayemi Cardoso, Governor of CBN, disclosed this development in his Keynote Speech at the 2023 Bankers’ Dinner held late Friday, November 24, 2023.

Cardoso said though there has been relative stability in the banking sector of the Nigerian economy, banks in the West African country are not adequately capitalised to meet the need of a $1 trillion economy, which the current administration is planning to attain.

The CBN Governor in his address at the well-attended event, stated: “Will Nigerian banks have sufficient capital relative to the finance system’s needs in servicing a one trillion dollar economy in the near future?

“In my opinion, the answer is no, unless we take action.

“Therefore, we must make tough decisions regarding capital adequacy. As a first step, the Central Bank will be directing banks to increase their capital.”

On significance of tech, banks’ infractions in financial system

Cardoso also emphasised the strategic the importance of application of modern technology in delivering financial services to consumers as well as enhancing financial inclusion in the  ecosystem in Nigeria.

The CBN Chief as well discussed how certain financial institutions have breached their licence obligations regarding the use of technology to facilitate payments to consumers of financial products and services.

He noted that the CBN, as the banking sector regulator, had observed that some institutions were operating outside the approved activities in the industry.

Cardoso stated: “Any intentional or unintended non-compliance will be subject to sanctions as operators have the responsibility to ensure that they are licenced for the activity they undertake.

Imminent review of licensing frameworks, by Cardoso

The CBN Governor said, “As we conduct a comprehensive review of the licencing framework for payment services, we will engage in extensive consultations to engage a new regulatory and compliance framework that is suitable for the technology-driven payment services sector.”

According to him, the banking regulator recently restored the 43 items previously restricted from accessing Foreign Exchange (Forex) from the Investor’s and Exporters’ (I&E) Window.

He further explained: “During the period when the 43 items were restricted, there was a 51 percent increase in trade evasion by importers accessing the Foreign Exchange market.

Cardoso, however, observed the situation resulted in reduction of the West African country’s approximately $1.4 billion revenue annually between 2015 and 2019.”

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