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CBN Plans to Recapitalize the Banking Sector Soon – Emefiele

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CBN Plans to Recapitalize the Banking Sector Soon – Emefiele
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By Tony Obiechina, Abuja

The Governor of the Central Bank of Nigeria, CBN, Mr Godwin Emefiele, says there are plans to carry out a recapitalization exercise for deposit money banks in the country.

Emefiele who made this known while unveiling the Bank’s five-year policy direction in Abuja on Monday, 24th June, 2019 noted that the banks’ capital base which was last recapitalised in 2004 “has been weakened”.

Bank recapitalization is the act of changing the capital structure of a bank to provide more equity funds to meet the bank’s long-term financing needs to ensure the security of shareholders fund.

In July 2004, the CBN announced the recapitalization of the banking sector from N2 billion to N25 billion with effect from December 31, 2004.

This led to the reduction in the number of banks to 24 from 89.

He commended his predecessor, Prof Chukwuma Soludo for raising the capital base from N2 billion to N25 billion in 2004 adding now is the time to recapitalise.

“You will all agree with me that it was governor Soludo in 2004 that did the last recapitalization moving the capitalization from N2 billion to N25 billion. 

“I must commend those efforts because it resulted in positioning Nigerian banks not only in Africa but also being among the top banks in the world in terms of capitalization and also helped to increase and strengthen the banks’ capacity to take on large ticket transactions and those are some of the things we badly need today.

“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 360, you can see that it is substantially lower than $75 million so what we are trying to say is that the capitalization has weakened quite substantially, and there is a need for us to say that is time to recapitalize Nigerian banks
again.

“It is a policy trust, which will be discussed, at the Committee of Governors meeting and of course, the framework for recapitalization of Nigerian banks will be unfolded for the whole world to know.

“We will continue to improve our on-site 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.

“In the next five years, we intend to pursue a programme of recapitalising the Nigerian banking industry so as to position Nigerian banks among the top 500 in the world.“

“Banks will, therefore, be required to maintain a high level of capital as well as liquid assets in order to reduce the impact of an economic crisis on the financial system. With a rise in digital payment and cybersecurity threats”, Emefiele stated.

On the power sector, the Governor said, “our intervention in the power sector is continuing, we had done some interventions; the N213 billion which was meant to settle some of those obligations and also the N700 billion. I must confess that we are not too happy with the way the whole power sector arrangement is unfolding, but in the course of time, provide our advice as to the best ways to really tame this power issue. 

“But I want to say that yes, part of the challenges that businesses face is power but what I am saying is that we should try to harness the innate strengths in us not to allow not accessing power to derail us from our own shared objectives that we must work hard, create jobs and improve supply and stabilize prices in Nigeria. 

“Don’t get me wrong, we would continue to intervene in that sector but it should not be an excuse to let down our guards to result in a situation where there will be unemployment and hopelessness in our country”, the Governor stressed. 

On whether the policy would lead to mergers and acquisition, the CIBN boss said there was no need to preempt the CBN or banks but that the system will in itself unfold when the guidelines are released.

It is the view of other economic experts, that the present N25 billion recapitalisation introduced in 2004 “does not have the same value as what obtains in 2019 coupled with the differentials in exchange rate over a 15-year period”.

Going forward, the Apex Bank is expected in next five years to leverage on Emefiele’s achievements which had convinced the Buhari Administration to renew his tenure despite opposition from some quarters.

And in readiness for the tasks ahead, the governor disclosed that he has held consultations with some banks and business leaders in the Private sector.

“We intend to sustain the pace of those consultations as this would act as barometer for measuring the progress being made in the implementation of our policies. Our assessment of the outcome of that deliberation shows that with concerted efforts, the challenges facing the country are easily surmountable”, he posited.

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NAICOM, RMAFC Collaborate on Economic Diversification 

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By Tony Obiechina, Abuja 

The Commissioner for Insurance and CEO, Mr. Olusegun Ayo Omosehin, and his management team have met with the members of the Constitutional Committee on “Mobilisation and Diversification” of the Revenue Mobilisation Allocation and Fiscal Commission ( RMAFC) led by Engr.

Sani Mohammed Baba, to explore ways of diversifying the Nigerian economy.
 

During their working visit to NAICOM Headquarters, Mr.

Olusegun Ayo Omosehin, in his opening remarks, reaffirmed the critical role of the insurance sector regulator in supervising, regulating, and safeguarding the interests of insurance policyholders. 

He highlighted insurance’s pivotal role in mobilising savings for long-term developmental projects and enabling businesses to thrive while managing risks effectively.

 

He also stressed the Commission’s commitment to ensuring insurance companies meet their obligations, thus contributing to the sustainability of the economy.

Speaking, Mohammed Baba emphasised the importance of revenue generation, institutional expansion, and employment creation for Nigerians through collaborative efforts.

The Commissioner for Insurance also acknowledged President Bola Ahmed Tinubu’s ambitious goal of growing the Nigerian economy to One Trillion United States Dollars ($1 trillion) by 2026. 

He expressed the insurance sector’s intent to significantly contribute to this objective. Additionally, he mentioned ongoing efforts to embed insurance within the National Credit Scheme to ensure its sustainability.

Omosehin stressed the need for continuous advocacy and sensitization of government institutions about the vital role of insurance in national economic development.

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CBN Unveils Strategy to Boost Remittances, Grants AIP To 14 New IMTOs

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By Tony Obiechina, Abuja 

The Central Bank of Nigeria (CBN) has activated plans to double foreign-currency remittance flows through formal channels by granting 14 new International Money Transfer Operators (IMTOs) Approval-in-Principle (AIP).

This was disclosed in Abuja on Wednesday, by the Bank’s Acting Director of Corporate Communications, Mrs.

Hakama Sidi Ali, who stated that the initiative will help increase the sustained supply of foreign exchange in the official market by promoting greater competition and innovation amongst IMTOs to lower the cost of remittance transactions and boost financial inclusion.
 

She said, “This will spur liquidity in Nigeria’s Autonomous Foreign Exchange Market (NAFEX), augmenting price discovery to enable a market-driven fair value for the naira.

“It will be recalled that the CBN Governor, Mr. Olayemi Cardoso, had recently declared: “We’ve set ourselves a target to double remittance flows into Nigeria within a year, a goal I firmly believe is within reach. 

“We are wasting no time driving progress to remove any bottlenecks hindering flows through formal channels permanently. We have a determined pathway and a sequenced approach to tackling all challenges ahead, working hand in hand with key stakeholders in the remittance industry,” she stated.

Continuing, Sidi Ali, said that the CBN viewed increasing formal remittance flows—one of the major sources of foreign exchange, accounting for over 6% of GDP—as a means of reducing the historical volatility in Nigeria’s exchange rate caused by external factors, such as fluctuations in foreign investment and oil export proceeds.

The increase in the number of IMTOs is one of the primary actions initiated by the CBN’s remittance task force, overseen by Governor Cardoso as a collaborative unit pulling together specialists to work closely with the private sector and market operators to facilitate the ease of doing business in the remittance ecosystem in Nigeria. 

The task force was established as a direct result of an executive learning session with IMTOs during the World Bank/IMF Spring Meetings held in Washington DC, United States of America, in April 2024. The task force will meet regularly to implement strategy and monitor the impact of its measures on remittance inflows.

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Tinubu Inaugurates Critical Gas Projects, Reassures Energy Sector Investors

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By Matthew Dadiya, Abuja

President Bola Tinubu has reassured investors in the energy sector of his administration’s resolve to further enhance the business environment and ensure investment convenience.

The President spoke Wednesday at the inauguration of three milestone projects, including the expanded AHL Gas Processing Plant; the ANOH Gas Processing Plant, and the 23.

3km ANOH – Obiafu-Obrikom-Oben (OB3) Custody Transfer Metering Station Gas Pipeline.

In a speech during the virtual inauguration of the projects at the State House, Tinubu also assured citizens that his administration is stepping up its coordination of other landmark projects and initiatives that will ensure the earliest realization of gas-fueled prosperity in the country.

 

The President, according to a statement by Special Adviser on Media and Publicity, Ajuri Ngelale, noted that the projects were fully in line with the Decade of Gas Initiative and his administration’s vision to grow value from the nation’s abundant gas assets, while concurrently eliminating gas flaring and accelerating industrialization. 

“This event is highly significant to our country as it demonstrates the administration’s concerted efforts to accelerate the development of critical gas infrastructure geared at significantly enhancing the supply of energy to boost industrial growth and create employment opportunities.

“It is pleasing that when these projects become fully operational, approximately 500MMscf of gas in aggregate will be supplied to the domestic market from these two gas processing plants, which represents over 25% incremental growth in gas supply. 

“In practical terms, this is more gas to the power sector, gas-based industries, and other critical segments of the economy. I, therefore, commend the strategic vision of the NNPC Limited and its partners, Sterling Oil Exploration & Energy Production Company Limited (SEEPCO) and Seplat Energy Plc, for this laudable and value-adding projects,” President Tinubu said.

The President said his government remains determined in its bid to leverage the nation’s vast gas capacity to drive economic growth. 

“Aside from the presidential CNG initiative which is aimed at moving the good people of Nigeria away from petrol and diesel as vehicular combustion fuel, significant progress has also been recorded in incentivizing gas development through Presidential Directives.

“The theme of this inauguration – ‘From Gas to Prosperity; Renewed Hope’, must be adopted by all gas-sector participants and would-be investors as a clarion call to ramp up efforts to accelerate investment and developments of projects in the gas sector on a win-win basis.

“I would once again commend the efforts of NNPC Ltd, alongside SEEPCO and Seplat Energy, on this business partnership initiative, and congratulate you all on the successful implementation of the three projects,” the President said.

President Tinubu also reiterated his government’s resolve to continue to provide support in deepening domestic gas utilization, increase national power generation capacity, revitalize industries, and create multiple job opportunities for economic growth.

“Today, I have the singular honour to inaugurate the expansion of the AHL Gas Processing Plant, the ANOH Gas Processing Plant, and the 23.3Km ANOH to Obiafu-Obrikom-Oben (OB3) Custody Transfer Metering Station Gas Pipeline Projects in line with my administration’s resolve to provide energy for Nigerians, and to use our vast natural gas resources to transform Nigeria,” the President stated.

May 15, 2024

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