Banks require recapitalization to withstand macroeconomic risks, according to the Central Bank of Nigeria (CBN).

The Central Bank of Nigeria’s Governor, Dr. Olayemi Cardoso, emphasized the imperative of the proposed banking recapitalization as a crucial measure to shield banks from macroeconomic risks and facilitate their involvement in substantial financial transactions. He conveyed this message during the 2023 Nigeria Sustainability Summit, organized by Access Holdings Plc in collaboration with the European Sustainable Development Organisation (EOSD) and Financial Nigeria, held in Lagos.

Represented by Mr. Haruna Bala Mustapha, Director of Financial Policy and Regulation at the CBN, Cardoso underscored the current economic conditions and the necessity to safeguard the banking sector against risks stemming from the impact of new policies. He highlighted the inadequacy of the N25 billion capital requirement for banks established in 2005 to meet the contemporary operational risks and the ambitious goal of building a $1 trillion economy.

Addressing the prevailing macroeconomic challenges, Cardoso stated, “I don’t need to enumerate them all, but we can all relate to what is happening now, tying it to the traditional function of capital to cushion unexpected losses.” He pointed out that recent policies, such as the removal of fuel subsidies and the recent forex exchange rate unification, have affected the banking system. Banks are now breaching key metrics like the single obligor limit due to these policies.

Highlighting the need for a reassessment of the existing capital requirements, Cardoso remarked, “Today, with all the gathering clouds, the risks on the horizon, N25 billion today, I want you to do the numbers, is at best $25 million. Now put that in the context of risk and then the capacity to build a $1 trillion economy and also for banks to support their operations.”