No more N25bn: CBN to increase Nigerian bank recapitalization ahead of $1trn GDP target

The governor of the Central Bank of Nigeria (CBN), Olayemi Michael Cardoso, told Nigerian banks to prepare for a new round of banking sector recapitalization as the nation works towards the $1 trillion Gross Domestic Product (GDP) target.

He said this at the 58th Annual Bankers Dinner by the Chartered Institute of Bankers of Nigeria (CIBN) in Lagos.

It could be recalled that the last banking recapitalization in 2004 saw banks increase their capital base from N2 billion to the current N25 billion.

However, Analysts have said that the amount is no longer enough to meet current economic realities.

According to a report by The Nation, Cardoso said that the current bank capitalization would not be able to handle President Tinubu's administration's GDP expansion drive.

He said the country requires sustainable and inclusive economic growth to attain the target.

According to him, the administration has started the journey through fiscal reforms, including the removal of petrol subsidies and the unification of the foreign exchange market rate.

Despite the challenging global and domestic macroeconomic environment, Cardoso said that the country's financial sector has shown resilience.

He added that amid the economic headwinds, banks could meet the domestic macroeconomic environment regulatory benchmarks during the period.

He stated: Stress tests conducted on the banking industry also indicate its strength under mild-to-moderate scenarios of sustained economic and financial stress, although there is room for further strengthening and enhancing resilience to shocks.

Therefore, there is still much work to be done in fortifying the industry for future challenges.

The CBN governor admitted the presence of significant challenges like high and rising inflation, inadequate foreign exchange supply, depreciation of the exchange rate, limited external reserves, weakened output, and high unemployment.

He said:

These challenges have led to increased interest rates, discouraging investments in productive activities. Within the banking system, high inflation has affected asset quality and solvency ratios. Additionally, the persistent depreciation of the naira poses a significant risk for domestic banks with foreign exchange exposures.

He, however, assured that the obstacles could become progress and prosperity with the right policy measures.