The planned recapitalization of banks has received the nod of the Lagos Chambers of Commerce (LCCI), the leadership of the CIBN and Capital Market operators.
The LCCI praised the apex bank’s move to review the minimum capital base of banks due to consistent devaluation of the Naira that has eroded the capital base of banks.
In a statement yesterday, its Director-General, Dr. Chinyere Almona said the planned recapitalization will attract significant investment into banks as well as increase the capacity of banks to provide the required support for the economy.
She however, cautioned the CBN to strengthen its banking supervision to avoid “Too big to fail” banks, saying.
NIGERIAN banks are well-positioned to meet the Central Bank of Nigeria (CBN’s) directive to increase their capital base.
President of the Chartered Institute of Bankers of Nigeria (CIBN) Mr. Ken Opara, ALSO gave the assurance of the readiness of the banks’ readiness for the recapitalization move of the CBN.
He spoke in Abuja yesterday at the 22nd National Seminar on Banking and Allied Matters for Judges.
Opara highlighted the banks’ readiness and capability to raise the necessary funds through various means, including bond issuance and capital raising from the stock market.
Despite the significant capital requirement of $1 trillion, Opara insisted that the banking industry has the financial strength and experience to successfully achieve the recapitalization goal.
He pointed to the banks’ track record of exceeding previous capital base requirements and the depth of the Nigerian stock exchange as evidence of their ability to raise the necessary funds.
Also the National-Coordinator, Independent Shareholders Association of Nigeria, Moses Igbrude projected that the proposed recapitalization policy would stimulate the financial sector and capital market.
He advised players to apply the lessons learned from the previous recapitalization to evade drawbacks.
He said: “To enhance its effectiveness, there’s a need for players to use lessons learnt from the last recapitalization in order to avoid the pitfall of the last exercise.
Opara emphasized that the recapitalization process is ongoing and that the banks are actively engaged in preparing for the increased capital requirements. He assured that the banks will be ready to comply with the CBN’s directive whenever the specific amount is announced.
According to Opara, “$1trillion is something that is very important, it’s achievable because already there has been different capital raising process, you will also see that banks have raised bonds as much as possible and have repaid those bonds when they mature.
It’s not a difficult thing to be bothered about funding $1 trillion, I think the major thing is that the industry is deep, they have deep pockets, they have the financial strength.
LCCI also urged the Central Bank of Nigeria (CBN) to adopt the right policy mix to control high inflation and ensure the stability of the exchange rate in order to support growth and job creation.
Its Director-General, Dr. Chinyere Almona said interest rates and unstable exchange rates have taken a toll on businesses and households. She stated this while responding to the CBN Governor ‘s statement at the CIBN’s 58th Annual Bankers Dinner and the Grand Finale of the Institute’s 60th Anniversary.
Almona said though the CBN boss seems to be on the right track, the Chamber is concerned about the state of the economy, particularly the volatile foreign exchange situation, high inflation, and general uncertainty.
She said: “Over the years, the Chamber has consistently expressed concerns about the implications of high inflation, high interest rate and unstable exchange rates on businesses and households. We are aware of the enormous challenges and the uphill task before the CBN in ensuring macroeconomic stability and restoring investors’ confidence. However, we note the inconsistencies between the Federal Government’s vision of achieving a $1 trillion economy in the next six years and the medium-term expenditure framework (MTEF).”
Almona lamented that the macroeconomic projections in the MTEF which stated that the economy will grow by 3.76 per cent, 4.22 per cent and 4.78per cent in 2024, 2025, and 2026, respectively may not happen as the projected growths are sub-optimal to achieve a $1 trillion GDP by 2029, which implies an average growth of 21 per cent over the next six years.
“The stock exchange where they are going to go to the market to raise this is also quite deep, the stock exchange for instance is the second biggest stock exchange market in Africa, that tells you clearly that it is a deep market and we have the ability to raise funds that will fund that project as much as possible, so we are very prepared,” he said.
The CIBN president identified four major challenges giving Nigerian bankers sleepless nights. Specifically, he bemoaned the unlawful harassment of bank officials by the Economic and Financial Crimes Commission (EFCC) among other challenges.
With regards to the issuance of Bankers Orders by magistrate courts, the CIBN President noted that magistrate courts were fond of issuing Bankers Orders, which are orders to freeze bank accounts, without proper legal authority. These orders he said are often issued based on a non-existent or repealed law, and they cause hardship for banks, who are open to litigation from their customers if they comply with the orders. He then called on the “Chief Magistrate Court to intervene and ensure that Bankers Orders are only issued by the High Court”.
Opara lamented that EFCC officials were always storming banks and demanding that they place Post No Debits (PNDs) on customers’ accounts without an order of court. “This is a violation of the legal provisions on confidentiality of bank accounts. When banks demand an order of court, EFCC officials harass and intimidate bank officials and, in some cases, arrest them. Banks are calling for EFCC to be held accountable for their reckless actions, in order to curb the abuse of power” he said.
Opara also frowned at what he called “inappropriate deployment of garnishee”. According to him, “judgment creditors are often proceeding against all banks as garnishees, without first verifying the indebtedness of the bank to the judgment debtor. This practice imposes unreasonable costs on banks, who are forced to pay legal fees even if they do not have the judgment debtor’s funded account. In some cases, banks do not receive summons from the court for the hearing, and the court may proceed to issue a garnishee absolute judgment on the bank”. He then called on the judiciary to address this long-standing problem in order to protect depositors’ funds.
The CIBN president noted that cybersecurity incidents are on the rise across the continent, and the financial sector is especially susceptible to cyber-attacks. “The CBN is taking steps to address this issue, but the judiciary also needs to play a role.
“Banks are calling for the judiciary to collaborate with relevant bodies to develop a structure and build capacity to adjudicate on cybercrime cases in Nigeria”.
CBN Governor, Mr. Yemi Cardoso who was represented by Mr. Kofo Salam- Alada noted that a robust and efficient judicial system acts as a magnet for Foreign Direct Investment (FDI), as investors seek stable and predictable environments where their business interests can be protected, and disputes can be resolved fairly and expeditiously.
This FDI influx he said, “strengthens a nation’s foreign reserves, moderates’ inflation, and stabilizes exchange rates, paving the way for sustainable economic growth and price stability”.
According to the CBN Governor, “whilst the judiciary does not actively participate in the formulation and implementation of policies geared towards economic development, its role in interpreting and pronouncing on these policies when they are brought before the Courts for adjudication is indicative of the judiciary’s indirect involvement in monetary and economic policy formulation and implementation.
“Thus, the Judiciary invariably contributes to the effectiveness of monetary policy, financial system stability, economic growth and development through their interpretation of statutes and sometimes giving effect to the acts of the government and its agencies, where such statutes and acts relate to monetary policy, financial system stability, growth and development”.
