The Presidency has supported the Central Bank of Nigeria’s plan to raise the capital base of deposit money banks in the country.
President Bola Tinubu, delivering a goodwill message at The Guardian Newspapers’ 40th-anniversary celebration in Lagos on Tuesday, emphasized the importance of bank recapitalization in realizing a $1 trillion economy.
The President’s Special Adviser on Information and Strategy, Bayo Onanuga, represented him at the event.
“Amidst the general lull in global economy, our ambition to attain a $1 trillion economy appears daunting. But we believe it is achievable, with God on our side and our collective determination. This explains why the Vice President and I have been on the road, trying to attract huge investments in various facets of our economy: agriculture, oil and gas, renewable energy, and others.”
“To arrive at the $1 trillion economic destination, we believe that we must address the capital adequacy of our banks that will provide the fuel for the journey,” the President stated.
On Friday, CBN Governor Olayemi Cardoso announced that commercial banks in the country would receive a directive to enhance their capital base.
He emphasized that the current capital levels of commercial banks are insufficient to meet the financial system’s requirements for servicing a $1 trillion economy.
He said, “Considering the policy imperatives and the projected economic growth, it is crucial for us to evaluate the adequacy of our banking industry to serve the envisioned larger economy.”
“It is not just about the stability of the financial system at the moment as we have already established at the current assessment to show stability.”
“However, we need to ask ourselves: will Nigerian banks have sufficient capital relative to the finance system needs in servicing a $1trn economy in the near future? In my opinion, the answer is ‘No’ unless we take action.”
“Therefore, we must make difficult decisions regarding capital adequacy. As a first step, the Central Bank will be directing banks to increase their capital.”
The last time the CBN increased the capital base for banks was in 2005 when the current Anambra State Governor, Charles Soludo, was the apex bank chief. The capital base was raised from N2bn to N25bn.