From Collins Olayinka, Abuja
•Domesticate part of Nigeria’s foreign reserves, Alawuba tells CBN
•‘Unfreezing 40% of CRR could unlock long-term funding’
With one year to the official commencement of the new bank capital base, fresh entrants into the industry must comply with the new requirements. Speaking yesterday at the 36th edition of the Finance Correspondents and Business Editors Association of Nigeria (FICAN), Director of Banking Supervision of the Central Bank of Nigeria (CBN), Dr Olubokola Akinwumi, stated that all the new applications received after April 1, 2024, are required to comply with the new policy.
“While existing banks are required to meet the minimum capital requirement within 24 months commencing from 1st April 2024 and terminating on 31st March 2026, the requirement is immediately applicable to all new applications for banking licences submitted after 1st April 2024 for proposed banks,” he explained.
The director explained that the theme of the workshop, ‘Playing the Game: Banking Recapitalisation towards a One-Trillion Dollar Economy’, aligned with the decision of the CBN to increase the banks’ capitalisation, which ended up pre-empting the emerging economic trends, especially as triggered by Donald Trump’s administration.
Akinwumi hinted that the CBN has put in place guidelines that will flag illicit flow and borrowed funds into the recapitalisation exercise, saying that allowing questionable funds into the banking sector would threaten and compromise the credibility and stability of the financial sector.
With the recapitalisation policy on track, Akinwumi insisted that Nigerian banks are firmly placed to confront challenges thrown at the Nigerian economy by Trump’s economic directions.
According to him, the recapitalisation exercise is targeted at achieving strengthened financial system stability, enhancing lending capacity, improving competitiveness and promoting consolidation and innovation.
“As banks explore mergers or innovative capital-raising options, we expect to see more efficient and technology-driven institutions emerge. The recapitalisation will stimulate the formation of stronger banking institutions capable of driving innovation in digital banking, fintech, and financial inclusion,” he added.
He explained that the recapitalisation exercise is essential for securing the funding necessary to achieve the goal of a $1 trillion economy, which the current administration is working toward.
In his paper, ‘Banking Recapitalisation Towards a One-Trillion Dollar Economy: The Industry Perspective,’ Managing Director of United Bank for Africa (UBA), Oliver Alawuba, noted that Nigerian banks can manage Nigeria’s foreign reserves, saying the government can start by domesticating 20 to 30 per cent of the reserves.
“In 19 countries where UBA operates, we are managing some countries’ foreign reserves. If foreigners can trust us to do so, the CBN could allow us to manage part of Nigeria’s foreign reserves.”
He also argued that Nigerian banks are making enormous sacrifices for the economy by sacrificing 50 per cent of their cash reserve ratio (CRR), which they mobilised at a cost. He said banks could be encouraged to support the economy with long-term funds by unfreezing and investing 40 per cent of CRR.
For Nigeria to achieve a $1 trillion economy by 2030, he said, conscious efforts must be made to build stronger and more resilient banks. “At the rate of 3.84 per cent, we will not make a $1 trillion economy. For us to get there, clearly, we need to grow in double digits. And the minimum double digit you can get is 10 per cent. So, this economy needs a transformation that will propel the growth to a minimum of 10 per cent for us to get to $1 trillion in 2030.”
