Nigeria: CBN Attributes Bank Recapitalisation to Stress Test Findings and Economic Conditions

The Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, has highlighted that the decision to increase minimum capital requirements for banks stemmed from various factors, including stress test outcomes, macroeconomic conditions, and the imperative for enhanced risk management.

Speaking at the UK-Nigerian Chamber of Commerce in London on “The Impact of the Recapitalisation of Nigerian Banks,” Cardoso underscored that these factors necessitated the adjustments to bolster the resilience and stability of Nigeria’s banking sector.

He outlined that the recapitalisation program aims to expand banks’ lending capacity, stimulate foreign direct investment, and augment foreign exchange liquidity within the economy.

Represented by CBN’s Deputy Governor, Financial Systems Stability, Mr. Phillip Ikeazor, Cardoso reaffirmed the CBN’s commitment to fostering robust and resilient banks capable of weathering economic uncertainties and supporting the government’s objective of achieving a GDP of US$1 trillion by 2030.

Emphasizing the strategic importance of the recapitalisation exercise, Cardoso assured stakeholders of ongoing collaboration with financial institutions, fiscal authorities, and the National Assembly to ensure its success. He stressed the importance of safeguarding property rights and minority shareholder interests throughout the process.

The initiative, Cardoso explained, aims not only to spur GDP growth but also to enhance risk management practices, elevate credit ratings, diversify ownership structures, and promote sound governance and strategic decision-making. These efforts are expected to amplify market activity and value, fostering a more dynamic equity market environment.

In March, the CBN announced revisions to the minimum capital requirements for banks, stratified by the type of banking license. Currently, banks with regional, national, and international licenses are mandated to maintain minimum capital bases of N10 billion, N25 billion, and N50 billion, respectively.

Cardoso reiterated the CBN’s commitment to upholding stringent “fit and proper criteria” for new shareholders, senior management, and board members. He also highlighted the directive’s alignment with international standards such as Basel III, emphasizing core capital elements to fortify financial stability.

Reflecting on past banking sector reforms, Cardoso drew parallels to the successful 2004/5 reforms that bolstered capital bases and resilience amid global financial crises. He affirmed that the current recapitalisation drive aims to build upon these achievements, ensuring a robust and sustainable banking sector for Nigeria’s economic future.