CBN considers recapitalization of commercial banks
• Banks adopt inflation targeting and claim to meet MPC meeting requirements
• Discontinue intervention programs to continue core mission.
The country’s commercial banks may be required to increase their capital in the coming months.
The Governor of the Central Bank of Nigeria (CBN), Yemi Cardoso, hinted at this at the 58th Annual Bankers Dinner held in Lagos last night.
Cardoso highlighted President Bola Ahmed Tinubu’s economic policies, including raising production levels to $1 trillion, and whether Nigerian banks have sufficient capital requirements to finance such an economy. said it was doubtful.
“It is important to assess the adequacy of banks,” he said, noting that the CBN will direct banks to increase their capital base.
He added: “The stability of the financial system is not the only issue at the moment, as we have already established that the current assessment indicates stability.” But we have to ask ourselves: Will Nigerian banks have enough capital for the needs of the financial system to serve a $1.0 trillion 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, we instruct banks to increase their capital. ”
He said that in its current form, the bank has passed the stress test. But he balked at the banks’ power to finance the economy in the near future.
Regarding the controversial Monetary Policy Committee (MPC) meeting, which the bank missed for the second consecutive time, Cardoso said the apex bank had met the statutory requirement of holding at least four meetings a year.
“For the avoidance of doubt, the Central Bank of Nigeria Act 2007 requires that the Nigerian Bank Monetary Policy Committee meet at least four times a year and the Bank will meet this requirement in 2023. “We are focused on ensuring that the Monetary Policy Committee of the Central Bank of Nigeria convenes. These meetings are useful and effective,” he said.
He acknowledged that there has been recent confusion in the transmission of monetary policy, which has made it less effective. Therefore, the Bank endorsed an explicit inflation target as the objective of monetary base management to control inflation.
He said details of the inflation targeting framework were being worked out with fiscal authorities.
He assured that the bank would continue its efforts towards achieving price stability to save the lives of millions of Nigerians.
Mr. Cardoso revealed for the first time the circumstances that led to his appointment, saying the CBN had lost a great deal of trust. He noted that the bank would henceforth cease all forms of intervention that had injected about 10 trillion naira into the economy in recent years.
He said that instead of directly intervening, the bank would work with key stakeholders to support growth, including promoting specialized institutions.
Talking about the payment of foreign exchange balances, he said the tranches were disbursed to 31 banks. He assured that payments would continue until all obligations were met.
He emphasized that the central bank is the lender of last resort and pledged to irrevocably support this.
He added that the bank stands by Nigerians in all transactions and policy measures.
Regarding the reason why the 43 products that were previously on the FX blacklist were added to the list, he pointed out that the government did not have time to ban these products.
The governor spoke passionately about the new CBN, saying he would do everything humanly possible to redeem the institution and steer it in a controversial direction. For him, the efforts of the past few months are starting to pay off, and the system will continue to build on those gains.
He said: “I am pleased to report that our efforts over the past two months have begun to bear fruit. This activity includes the following periodic open market operations (OMOs) to remove excess liquidity from the banking system. The OMO auction was recently held with a stop rate of 17.5% or a one-year term and attracted oversubscription of 350 billion naira. Another OMO round has been approved to further reduce excess liquidity. I did.
“The provision of Treasury Bills worth N108.1 billion over three periods to retail investors will reduce liquidity in the banking system and assist the government in raising funds.
“Remove caps on the Charged Standing Deposit Facility (SDF) to increase SDF window activity and manage liquidity. ) debit.Liquidity across the banking sector declined significantly in November to less than 100 billion naira.
“A new liquidity management committee will be established within the bank that will meet daily at 8am to assess the liquidity situation and ensure optimal levels.”
He said fiscal and monetary authorities are working on efforts to stabilize the economy and support critical sectors.
He said regulated banks would work with key stakeholders to support the economy, rather than directly intervening. He said the bank is determined to focus on its core responsibilities, and that low interest rates, inflation and a stable exchange rate remain key focuses, unlike in the past when it dabbled in quasi-fiscal responsibilities in which it was incompetent. Stated.
Source: guardian.ng