CBN Mulls Fresh Recapitalisation Of banks, Single Digit Inflation.
By CHUKWUMAH KELECHUKWU
Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, has disclosed plans to carry out a fresh recapitalisation exercise to position Nigerian banks among the top 500 in the world as well as reduce potential impact of an economic crisis on the financial system.
Unveiling his five-year plan of the apex bank, Emefiele also noted that with a rise in digital payment and cybersecurity threats, there was need to strengthen deposit money banks in the country to make them better able to withstand shocks.
He also expressed hope that recapitalization would help solve exchange rate uncertainty in Africa’s largest economy where multiple exchange rates have created elbow room for arbitrage over which the apex bank has been widely criticized.
Outlining his five-year work plan the CBN boss pledged to target a double digit growth by the next five years and commit to working assiduously to bringing down inflation to single digit while accelerating the rate of employment.
Emefiele said he would continue to work to safeguard the stability of the country’s financial system while supporting the development of a payment system infrastructure that will improve access to credit for all eligible Nigerians.
According to him, additional emphasis would be placed on supporting greater growth of the economy and in reducing unemployment, through targeted interventions in the agricultural and manufacturing sectors.
“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 5 years are the following; First, preserve domestic macroeconomic 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,” Emefiele stated.
In July 2004, the CBN announced the recapitalisation of the banking sector from N2 billion to N25 billion with effect from December 31, 2005 an exercise that eventually resulted into mergers of some banks, reducing the number of banks to 24 from 89.
But about three years after, capital base of some of the recapitalized banks were eroded largely due to regulatory slumber and weak governance issues that gave rise to huge exposure to bad and non-performing loans in the financial system. This resulted to nationalization of the some of the banks and CBN’s strengthening of the regulatory measures, particularly its oversight role.
“We will continue to improve our on-site and off-site supervision of all financial institutions while leveraging on data analytics and our in-house experts across different sectors to improve our ability to identify potential risks to the financial system as well as risks to individual banks
“In the next five years, we intend to pursue a programme of recapitalising the Nigerian banking industry so as to position Nigerian banks among the top 500 in the world.
Banks will, therefore, be required to maintain a high level of capital as well as liquid assets in order to reduce the impact of an economic crisis on the financial system with a rise in digital payment and cybersecurity threats,” Emefiele stated.
He said CBN would not float the naira but instead would sustain its naira defence policy in the next five years saying it would “reduce the impact exchange rate volatility could have on our economy”.
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