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There are indications that the new minimum capital base requirements for Nigeria’s banks would range between N35 billion and N230 billion going by the new position of the Central Bank of Nigeria, CBN.
Yesterday, speaking to journalists on his agenda for the next five years, the Governor of the CBN, Mr Godwin Emefiele, explained that the current capital base of the banks are no longer realistic, principally because of the massive devaluation of the Naira since the benchmark was set about 10 years ago.
The apex bank under Lamido Sanusi as governor had pegged minimum capital base of banks at N15 billion (US$113 million at exchange rate of USD/132.85 then) for Regional Licence, N25 billion (US$188m) for National Licence and N100 billion (US$753m) for International Licence.
But at current exchange rate, the value of the Regional Licence has gone down to US$49 million from US$113 million, while National Licence is now down to US$82million from US$188 million with the International Licence down to US327.9 million from US$753 million.
Though Emefiele had indicated that the apex bank was looking at benchmarking with the Investors & Exporters, I&E forex window rate of USD/360, the apex bank may use the official rate of USD/305 to minimise the immediate impact on the banks.
Consequently, barring other considerations, at current official exchange rate of USD/ 305 the value of Regional Licence would be N35 billion, up 133 per cent from N15 billion, while that of National Licence would be N57.3 billion, up 128 per cent from N25 billion and International Licence at N230 billion, up 130 per cent from N100 billion.
On the percentage point increase, Chukwuma Soludo’s capital base adjustment was at 1,150 per cent to N25 billion from N1billion, while Joseph Sanusi, the CBN Governor before Soludo, had effected a 1,900 per cent increase.
Banks must recapitalize
Emefiele had stated: “In the next five years, we intend to pursue a programme of recapitalising the banking industry so as to position Nigerian banks among the top 500 in the world. Banks will therefore be required to maintain higher level of capital, as well as, liquid assets in order to reduce the impact of an economic crisis on the financial system.
“It was Governor (Chukwuma) Soludo, in 2004 who did the last recapitalisation we had, moving the capitalisation from N2 billion to N25 billion.
“I must commend that effort because it resulted in positioning Nigerian banks, not only in Africa, but to become among top banks in the world, in terms of capitalisation.
“It also helped strengthen the banks to take on large transactions and those are the things they badly needed.
“Today, when you relate N25 billion in 2001 exchange rate, which was about N100/$1, N25 billion was about $200 million. Today if you relate N25 billion at N360/$1, you can see that it is substantially lower than $75 million .
“What we are trying to say is that the capitalisation has weakened quite substantially and there is need for us to say it is time for us to recapitalise Nigerian banks again.
“It is a policy thrust which will be discussed at the Committee of Governors’ Meeting and of course, the framework for the recapitalization of Nigerian banks would be unfolded for the whole world to know.”
Vision for next 5 years
The governor said that in the next five years, his team would work closely with the fiscal authorities to ensure macro-economic stability, double-digit growth, single-digit inflation and greater access to finance for businesses.
Mr. Emefiele said: “Working closely with our fiscal authorities, we pledge to target a double digit growth by the next five years and at the CBN, we commit to working assiduously to bringing down inflation to single digit while accelerating the rate of employment.
“Put succinctly, our priorities at the CBN over the next five years are the following; First, preserve domestic macro-economic and financial stability; Second, foster the development of a robust payments system infrastructure that will increase access to finance for all Nigerians, thereby raising the financial inclusion rate in the country; Third, continue to work with the Deposit Money Banks to improve access to credit for not only small holder farmers and MSMEs but also consumer credit and mortgage facilities for bank customers.
“Our intervention support shall also be extended to our youth population who possess entrepreneurship skills in the creative industry.”
On foreign exchange management, he said: “We will continue to operate a managed-float exchange rate regime in order to reduce the impact which continuous volatility in the exchange rate could have on our economy”
The CBN, the governor said, would support measures that would increase and diversify Nigeria’s exports base and ultimately help in shoring up our reserves, particularly by supporting domestic industries and creating jobs on a mass scale for Nigerians.
The governor said, “We intend to aggressively implement our N500bn facility aimed at supporting the growth of our non-oil exports, which will help to improve non-oil export earnings.
“Will launch a Trade Monitoring System(TRMS) in October 2019, which is an automated system that will reduce the length of time required to process export documents from one week to one day. This measure will help support our efforts at improving our non-oil exports of goods and services.
“We will also work with our counterparts in the fiscal arm in supporting improved FDI flows to various sectors such as agriculture, manufacturing, insurance and infrastructure. These measures while supporting improved inflows into the country, will help stabilise our exchange rate and build our external reserves.”
Livestock/dairy intervention coming
Mr. Emefiele said that his team would boost productivity growth through the provision of improved seedlings, as well as access to finance for rural farmers in the agricultural sector, across 10 different commodities namely: Rice, Maize, Cassava, Cocoa, Tomato, Cotton, Oil-palm, Poultry, Fish, and Livestock/Dairy.
He said, “Our choice of these 10 crops is driven by the amount spent on the importation of these items into the country, and the over 10 million jobs that could be created over the next 5 years if efforts are made to expand cultivation and processing of these items in Nigeria. So far, we have held series of engagements with importers and producers of these products.
“Most of them have committed that they would install or expand their production capacities in Nigeria. We believe these measures will help to boost not only our domestic outputs but also improve our annual non-oil exports receipts from $2 billion in 2018 to $12 billion by 2023.”
He added that CBN would support an aggressive embroilment of prospective banking customers in the informal sector on to the BVN system and move the current enrolment of 38 million unique banking customers to 100 million over the next five years.
Mr. Emefiele said that the consumer credit programme would be pursued more vigorously, including mortgage at nine per cent interest.
KEY agenda
•Target double-digit growth by the next five years; bring down inflation to single digit
•Preserve domestic macro-economic and financial stability
•Foster development of a robust payments system infrastructure
•Work with banks to improve access to credit
•Continue to operate a managed-float exchange rate regime
•Support measures that would increase and diversify Nigeria’s exports base
•Launch a Trade Monitoring System(TRMS) to cut time required to process export documents from one week to one day
Yesterday, speaking to journalists on his agenda for the next five years, the Governor of the CBN, Mr Godwin Emefiele, explained that the current capital base of the banks are no longer realistic, principally because of the massive devaluation of the Naira since the benchmark was set about 10 years ago.
The apex bank under Lamido Sanusi as governor had pegged minimum capital base of banks at N15 billion (US$113 million at exchange rate of USD/132.85 then) for Regional Licence, N25 billion (US$188m) for National Licence and N100 billion (US$753m) for International Licence.
But at current exchange rate, the value of the Regional Licence has gone down to US$49 million from US$113 million, while National Licence is now down to US$82million from US$188 million with the International Licence down to US327.9 million from US$753 million.
Though Emefiele had indicated that the apex bank was looking at benchmarking with the Investors & Exporters, I&E forex window rate of USD/360, the apex bank may use the official rate of USD/305 to minimise the immediate impact on the banks.
Consequently, barring other considerations, at current official exchange rate of USD/ 305 the value of Regional Licence would be N35 billion, up 133 per cent from N15 billion, while that of National Licence would be N57.3 billion, up 128 per cent from N25 billion and International Licence at N230 billion, up 130 per cent from N100 billion.
On the percentage point increase, Chukwuma Soludo’s capital base adjustment was at 1,150 per cent to N25 billion from N1billion, while Joseph Sanusi, the CBN Governor before Soludo, had effected a 1,900 per cent increase.
Banks must recapitalize
Emefiele had stated: “In the next five years, we intend to pursue a programme of recapitalising the banking industry so as to position Nigerian banks among the top 500 in the world. Banks will therefore be required to maintain higher level of capital, as well as, liquid assets in order to reduce the impact of an economic crisis on the financial system.
“It was Governor (Chukwuma) Soludo, in 2004 who did the last recapitalisation we had, moving the capitalisation from N2 billion to N25 billion.
“I must commend that effort because it resulted in positioning Nigerian banks, not only in Africa, but to become among top banks in the world, in terms of capitalisation.
“It also helped strengthen the banks to take on large transactions and those are the things they badly needed.
“Today, when you relate N25 billion in 2001 exchange rate, which was about N100/$1, N25 billion was about $200 million. Today if you relate N25 billion at N360/$1, you can see that it is substantially lower than $75 million .
“What we are trying to say is that the capitalisation has weakened quite substantially and there is need for us to say it is time for us to recapitalise Nigerian banks again.
“It is a policy thrust which will be discussed at the Committee of Governors’ Meeting and of course, the framework for the recapitalization of Nigerian banks would be unfolded for the whole world to know.”
Vision for next 5 years
The governor said that in the next five years, his team would work closely with the fiscal authorities to ensure macro-economic stability, double-digit growth, single-digit inflation and greater access to finance for businesses.
Mr. Emefiele said: “Working closely with our fiscal authorities, we pledge to target a double digit growth by the next five years and at the CBN, we commit to working assiduously to bringing down inflation to single digit while accelerating the rate of employment.
“Put succinctly, our priorities at the CBN over the next five years are the following; First, preserve domestic macro-economic and financial stability; Second, foster the development of a robust payments system infrastructure that will increase access to finance for all Nigerians, thereby raising the financial inclusion rate in the country; Third, continue to work with the Deposit Money Banks to improve access to credit for not only small holder farmers and MSMEs but also consumer credit and mortgage facilities for bank customers.
“Our intervention support shall also be extended to our youth population who possess entrepreneurship skills in the creative industry.”
On foreign exchange management, he said: “We will continue to operate a managed-float exchange rate regime in order to reduce the impact which continuous volatility in the exchange rate could have on our economy”
The CBN, the governor said, would support measures that would increase and diversify Nigeria’s exports base and ultimately help in shoring up our reserves, particularly by supporting domestic industries and creating jobs on a mass scale for Nigerians.
The governor said, “We intend to aggressively implement our N500bn facility aimed at supporting the growth of our non-oil exports, which will help to improve non-oil export earnings.
“Will launch a Trade Monitoring System(TRMS) in October 2019, which is an automated system that will reduce the length of time required to process export documents from one week to one day. This measure will help support our efforts at improving our non-oil exports of goods and services.
“We will also work with our counterparts in the fiscal arm in supporting improved FDI flows to various sectors such as agriculture, manufacturing, insurance and infrastructure. These measures while supporting improved inflows into the country, will help stabilise our exchange rate and build our external reserves.”
Livestock/dairy intervention coming
Mr. Emefiele said that his team would boost productivity growth through the provision of improved seedlings, as well as access to finance for rural farmers in the agricultural sector, across 10 different commodities namely: Rice, Maize, Cassava, Cocoa, Tomato, Cotton, Oil-palm, Poultry, Fish, and Livestock/Dairy.
He said, “Our choice of these 10 crops is driven by the amount spent on the importation of these items into the country, and the over 10 million jobs that could be created over the next 5 years if efforts are made to expand cultivation and processing of these items in Nigeria. So far, we have held series of engagements with importers and producers of these products.
“Most of them have committed that they would install or expand their production capacities in Nigeria. We believe these measures will help to boost not only our domestic outputs but also improve our annual non-oil exports receipts from $2 billion in 2018 to $12 billion by 2023.”
He added that CBN would support an aggressive embroilment of prospective banking customers in the informal sector on to the BVN system and move the current enrolment of 38 million unique banking customers to 100 million over the next five years.
Mr. Emefiele said that the consumer credit programme would be pursued more vigorously, including mortgage at nine per cent interest.
KEY agenda
•Target double-digit growth by the next five years; bring down inflation to single digit
•Preserve domestic macro-economic and financial stability
•Foster development of a robust payments system infrastructure
•Work with banks to improve access to credit
•Continue to operate a managed-float exchange rate regime
•Support measures that would increase and diversify Nigeria’s exports base
•Launch a Trade Monitoring System(TRMS) to cut time required to process export documents from one week to one day
(Vanguard)
