Enhancement of banks’ capital base or restructuring of banks’ capital structure, which is more popularly known in social parlance as bank recapitalisation, has become topical once again in the last few months ever since the Central Bank of Nigeria (CBN) first hinted at it in November last year and finally announced its decision to compel new capitalisation benchmarks for banks in March.

A similar exercise that readily comes to mind is the one midwifed by the Prof. Charles Soludo-led CBN about 20 years ago, which stipulated an increase from N2 billion to N25 billion, about 1200 per cent hike. The benefits which accrued from that exercise are well documented.

Unlike the Soludo capitalisation, which stipulated N25billion minimum capitalisation across board, the CBN, under Cardoso, has set different benchmarks for the various banks, depending on the category to which the licence of each bank belongs. Under this policy, international banks such as Access, First, GTBank, UBA and Zenith are to raise their minimum share capital to half a trillion naira, that is, N500 billion. Banks with only national coverage are to raise a minimum of N200 billion while regional banks are mandated to attain a baseline of N50billion. Non-interest banks such as TAJ, Jaiz and Alternative Bank are to move to N20 billion capitalisation. These differentiated baselines are reflective of the level of exposure to risk and the needs assessment for their jurisdiction.

It is an undeniable fact that policies such as this usually trigger apprehension across the various segments and sectors of the society. For example, following the Soludo recapitalisation, the number of banks operating in the country crashed by about 72 per cent from 89 to 25, which clearly would have led to some job losses.  It is, therefore, important for the promoters and the various publics to be, at least on a substantial scale, on a matter as crucial as this. 

So, what is in the recapitalisation of banks for the various stakeholders and Nigerians in general that should make it elicit the approval and buy-in of all and sundry?

First, a noticeable reduction in banks tally is not envisaged this time around, especially as there is the option for them to move downwards or upwards across categories. So, job losses, if at all, will be minimal. Indeed conversely, it is likely that more hands and technology will be needed in the reinvented sector.

With a President BolaTinubu administration that envisions a trillion dollar economy imminently, a strengthened banking industry that is globally competitive will be a major enabler for the realisation of such vision. Perhaps there is a cynic somewhere asking why we need a trillion dollar economy in the first place, that will be a matter for another day.

There is no doubt that a stronger capital base assures greater capacity for lending and sufficient hedges against shocks as may arise from time to time. After the Soludo recapitalisation, for example, Nigerian banks played a more significant role in the financing of oil and gas projects as well as in telecoms.

The manufacturing sector has not benefitted sufficiently from the banking sector thus far. Perhaps, a new day beckons from second quarter 2026 when the sector will begin to access the much needed support in terms of cheap funds it has always desired from the banking industry. Of course, this will result in mind blowing scenarios for catapulting the economy to heights yet unknown.

Prof. Uwaleke, President of the Association of Capital Market Academics in Nigeria, reacting when the apex bank first hinted at the plan in late 2023, said: “It goes without saying that capital is needed to finance big-ticket projects, especially when the government is targeting a one trillion dollar economy in a few years’ time.”

Dr. Ilias, an Abuja-based economist and policy analyst said: “When Soludo recapitalised (in 2004/2005) dollar to naira exchange was not like this, right now we are having serious liquidity problems. So the first advantage is that the Nigerian economy will have much more capital and the more the availability of capital the more the investment in Nigeria.

So if banks have more money, it means more money to give the manufacturing sector and indeed MSMEs because that is practically the challenge we have in Nigeria which makes lending to be currently skewed in favour of a few Organised Private Sector (OPS) enterprises.” 
 
Also, he said the banks would be positioned for greater profitability as they are enabled to engage in greater volume of trade. Ilias added that ‘it is valuable for bragging rights among the comity of nations as well as for positioning for credit opportunities from Bretton Woods organisations’.

To ordinary Nigerians, especially the businessmen among them, this is also good news as the banks will be positioned to be more responsive in granting their requests for more affordable credit facilities.
 Omoogun wrote from Lagos.