Professionals endorse the Central Bank of Nigeria (CBN) on the recapitalization of banks.

The growing demand for Deposit Money Banks (DMBs) to bolster their capital base in response to the current economic conditions has gained widespread support from experts. However, they caution against a repeat of the 2005 scenario, where smaller banks faced mergers as the only viable option.

Experts emphasize the importance of allowing regional or smaller banks to coexist with larger ones during the proposed recapitalization, echoing the sentiments of the Central Bank of Nigeria (CBN) Governor, Olayemi Cardoso, who hinted at plans for the banking system’s recapitalization during the 58th annual bankers’ dinner.

These experts argue that the devalued Naira has diminished the asset base of Nigerian banks in Dollar terms, emphasizing the need for recapitalization to inject funds into the economy, attract foreign investments, and support big-ticket projects for the government’s ambitious goal of a 1 trillion-dollar economy.

Dr. Chijioke Ekechukwu of Dignity Finance and Investment Limited sees the recapitalization as an opportunity to stimulate the economy, increase ICT capabilities, and create more jobs. Professor Uchenna Uwaleke of Nasarawa State University suggests a strategy focused on incentives rather than coercion, with well-capitalized banks receiving preferential treatment in the forex market.

Gbolade Idakolo, Managing Director of SD&D Capital Management Limited, underscores the necessity of recapitalization for the banking sector to be an effective engine of economic growth. He suggests a balanced approach, capitalizing banks regionally, nationally, and internationally to ensure the survival of smaller banks.

Dr. Muda Yusuf, Director/CEO of the Centre for the Promotion of Private Enterprise (CPPE), emphasizes the need to review minimum capital requirements, considering the considerable loss of value due to a depreciating domestic currency. Financial analyst Aliyu Ilias supports the recapitalization, emphasizing the banks’ lack of strength and liquidity to support Nigeria’s economy based on the last recapitalization.

Dr. Yusuf further outlines the importance of deepening the financial system, addressing challenges in credit access and cost for the private sector. He stresses the need to restore confidence in the forex market, considering the current challenges facing the Nigerian economy.

In conclusion, the consensus among these experts is that recapitalization is crucial for the Nigerian banking sector to support economic growth, but it should be executed strategically, considering the lessons learned from past experiences and prioritizing incentives over coercion.