“In my recent speech at the 370th Bankers’ Committee meeting, I highlighted the economic agenda of President Bola Ahmed Tinubu’s administration. The administration, as outlined in the widely circulated Policy Advisory Council report on the national economy earlier this year, has set an ambitious goal of achieving a Gross Domestic Product (GDP) of $1tn over the next seven years, with clearly defined priority areas and strategies. Attaining this substantial target necessitates sustainable and inclusive economic growth at a significantly higher pace than current levels. The administration has already commenced this journey through fiscal reforms, including the removal of petrol subsidies and the unification of the foreign exchange market rate.
“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 crucial to evaluate the adequacy of our banking industry to serve the envisioned larger economy. It is not just about its current stability. We need to ask ourselves, can Nigerian banks have sufficient capital relative to the finance system needs in servicing a $1tn economy shortly, in my opinion, the answer is no, unless we take action. As a first test, the central bank will be directing banks to increase their capital.”
He said, “It is a difficult figure for anybody to come up with. Even the central bank cannot come up with any figure as of today. All they have thrown into the open is a need. And that need for recapitalisation cannot be faulted for many reasons. When the recapitalisation was introduced in 2005, the exchange rate was a little over N100 to one dollar and the reason why the policy was introduced then was to give the banks, the opportunity to handle transactions in reasonable size on behalf of their customers. The same problem is with us today now with the value of the Naira viz-a-viz other foreign currency. So, their paid-up capital needs to be increased too.”
He added that the recapitalisation drive should be different from the 2005 episode, saying, “To come up with a figure, you have to do a lot of work. It should be more engaging now than before when the N25bn was announced. I will expect that the Bankers Committee, the central bank and even other agencies will sit down to determine what is the desirable figure that will be able to help banks themselves, their shareholders, customers and the economy. So it is not just a figure that anybody can drop anyhow. Otherwise, the problem of 2005 where banks of different backgrounds, cultures, and orientations, forced themselves together and the industry was in chaos.”