Financial Analysts Commend CBN’s Strategy to Achieve $1trn Economy

Financial and Business Analysts have commended the Central Bank of Nigeria (CBN) following its announcement that banks will be directed to increase their capital in preparation to serve an envisioned $1 trillion economy.

The CBN Governor, Olayemi Cardoso said, the bank needs to evaluate the adequacy of the banking industry to serve the envisioned larger economy.

Cardoso was speaking at the bankers’ dinner organised by the Chartered Institute of Bankers of Nigeria (CIBN) in Lagos.

The president Bola Ahmed Tinubu-led government in the Policy Advisory Council report on the national economy earlier this year, set a goal of achieving a Gross Domestic Product (GDP) of $1.0 trillion over the next seven years, with clearly defined priority areas and strategies.

“We need to ask ourselves: Will Nigerian banks have sufficient capital relative to the financial system’s needs in servicing 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,” Mr Cardoso said.

Ayodele Akinwunmi, relationship manager, corporate banking at FSDH Merchant Bank Limited, said, the recapitalisation will allow the banks to be well capitalised to continue to support the economy given the recent changes in the economy.

According to him, it will also position the industry well to take advantages of the expected growth in the economy. In addition, the recapitalisation process will attract foreign investors into the banking industry through Foreign Direct Investments(FDIs), therefore helping the country to drive part of the much needed long term foreign currency investment into this important and attractive sector to stabilise the value of the Naira.

“The banking industry will also use the opportunity to pitch to select foreign investors to drive the investments,” he said.

For Muda Yusuf, chief executive officer, Centre for the Promotion of Private Enterprise, it is a welcome development because banks’ capital has been eroded.

He said minimum capital requirements of the banking industry need to be reviewed in the light of the considerable loss of value amid depreciating domestic currency.

BusinessDay/Hauwa Abu