CBN plans new recapitalization for banks
The Central Bank of Nigeria (CBN) has said it plans to implement a new round of bank recapitalization for depository banks (DMBs).
The CBN Governor, Mr. Olayemi Cardoso, announced this at the 58th Annual Bankers Dinner organized by the Chartered Institute of Bankers of Nigeria (CIBN) in Lagos on Friday night.
The News Agency of Nigeria (NAN) reported that the planned recapitalization means DMB will need to raise additional capital to meet the demands of the Nigerian economy.
Mr. Cardoso said that President Bola Ahmed Tinubu, in his Policy Advisory Committee Report on the National Economy, set out clearly defined priority areas and strategies to achieve gross domestic product (GDP)1 by 2030. He pointed out that he had set an ambitious goal of reaching the trillion dollar mark.
He said it’s important that banks have a role to play in the $1 trillion economy expected by 2030.
Mr. Cardoso said the call for recapitalization had become imperative given the major developmental role the apex bank wants each bank to play over the next seven years.
Cardoso said that to achieve the goal, Nigeria needs to experience faster and more comprehensive economic expansion.
“The administration has already begun this effort through fiscal reforms, including eliminating gasoline subsidies and harmonizing foreign exchange market rates.
“Given policy imperatives and projected economic growth, it is critical for us to assess the suitability of the banking industry to serve the envisaged larger economy.
“The stability of the financial system at the moment is not the only issue, as we have already established that the current valuation indicates stability.
“But we have to ask ourselves: Will Nigerian banks have enough capital for the needs of a financial system serving a $1 trillion economy in the near future?” My opinion Well, the answer is “no!” Unless we take action.
“We therefore have to make difficult decisions regarding capital adequacy. As a first step, we will instruct banks to increase their capital,” he said.
The CBN governor also announced the approval of another round of open market operations (OMO) to purge excess liquidity from the banking system.
The OMO is a major monetary policy instrument through which central banks buy and sell securities with financial institutions in the open market, thereby influencing the amount of money in circulation and interest rates.
“The OMO auction was recently held with a stop rate of 17.5% on one-year notes and attracted oversubscription of N350 billion,” Cardoso said.
“Another OMO round has been approved to further reduce excess liquidity.
“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.”
Cardoso said the apex bank will utilize monetary policy tools to keep inflation low and stable.
He said: “The Central Bank of Nigeria is committed to achieving financial and price stability. This is not just a technical objective, but has real implications for the well-being of our people.
“Through targeted policies, transparent market operations, and coordination between monetary and fiscal authorities, we will ensure a more stable exchange rate, reduce inflation, and create an environment in which businesses and individuals can thrive. can do.”
He noted that the apex bank has taken steps to improve the effectiveness of monetary policy instruments and strengthen transmission mechanisms so that policy decisions have a greater impact on the economy.
Cardoso added that the monetary policy committee’s ability to influence the economy through its decisions has been weakened because the channels for transmitting monetary policy have been disrupted.
The CBN governor said the bank plans to change foreign exchange regulations in the country by formulating new guidelines and laws.
He said he would consult with banks and foreign exchange providers before making a final decision.
Source: guardian.ng