The Central Bank of Nigeria (CBN) has informed it will enforce stringent criteria for its ongoing bank recapitalisation programme.
It said the strict criteria will be applied for new investors to enhance financial system stability.
In a speech delivered at the UK-Nigeria Chamber of Commerce in London, CBN Governor Olayemi Cardoso (represented by Deputy Governor, Financial Systems Stability, Mr. Phillip Ikeazor), said the CBN “will rigorously enforce our “fit and proper criteria” for prospective new shareholders, senior management, and board members of banks”.
Cardoso also pledged to proactively monitor the integrity of financial statements to ensure the accuracy and transparency of financial reporting, verify the banks have sufficient capital to meet their operational needs and manage risks effectively as well as scrutinise the financial health of merged entities to ensure a realistic assessment of their financial position.
Cardoso reiterated the recapitalisation programme’s core objective which is “to trigger the emergence of stronger, healthier and more resilient banks.”
This, he said, aims to create a more robust banking sector capable of withstanding economic shocks and supporting the government’s ambitious goal of achieving a $1 trillion GDP by 2030.
The CBN Governor stated the anticipated benefits of the recapitalisation programme to include strong banks expected to lend more money to businesses and individuals, stimulating economic growth, more stable and secure banking system capable of attracting greater foreign investment as well as improved financial health which will lead to a more stable foreign exchange market.
Others are stronger capital buffers that will allow banks to manage risks more effectively, improved financial health, leading to better credit ratings for Nigerian banks, making it cheaper for them to borrow money, diversified ownership base as the programme is expected to encourage broader participation in bank ownership, stronger oversight and stricter criteria that could lead to improved decision-making within banks and increased market volume and value that will give rise to a healthier banking sector and ultimately lead to a more vibrant stock market.
The CBN clarified that the exclusion of retained earnings from the minimum capital requirement was to simplify calculations and enhance transparency. This Cardoso said aligns with international standards like Basel III, which emphasize core capital elements to promote financial stability.
Cardoso pointed to the successful 2004/5 banking sector reforms as a model for the current initiative. Those reforms, he pointed out, consolidated the industry, increased capital bases, and enhanced resilience during the global financial crisis.
