Deposit money banks in the country must raise their capital base to build the financial capacity to service the demands of a $1 trillion economy projected by the present administration, the Governor of the Central Bank of Nigeria (CBN), Yemi Cardoso, has said.
Cardoso who spoke on Friday at the 58th Annual Bankers Dinner in Lagos said raising the capital base by the commercial banks was inevitable to enable them play their roles under the economic agenda spelt out by the present administration, which includes increasing the country’s gross domestic product to $1 trillion over the next seven years.
“Attaining this target necessitates sustainable and inclusive economic growth at a significantly higher pace than current levels. It is crucial to evaluate the sufficiency of the banking industry to serve the envisioned larger economy,” he said.
The challenge before the apex bank, he said, was not just about the stability of the financial system at the moment, as current assessment of the performance of the banking system has shown the CBN has already established stability, but more how to mobilise sufficient capital relative to the financial system’s needs in servicing a $1 trillion economy in the near future.
To resolve this challenge, he said the apex bank must take difficult decisions on the issue of capital adequacy of the banks, saying as a first step the CBN would soon be asking commercial banks to raise their capital base.
It is not clear yet what the new minimum capital threshold would be from the existing N25 billion stipulated by the then Chukwuma Soludo’s management of the CBN.
But Cardoso said it would be crucial that in reaching that decision the CBN would prioritise price stability to safeguard the livelihoods of Nigerians.
He tackled the Godwin Emefiele-led management of the CBN for adopting policies that created a negative perception problem for the apex bank, particularly as a result of failure on corporate governance, diminishing independence and deviation of the Bank’s core mandate, inefficient management of the foreign exchange, and reckless venturing into development financing.
The CBN governor expressed confidence that by adopting appropriate corrective measures and strategies, macroeconomic stability could be restored and the fundamental flaws redressed.
The removal of subsidy on Premium Motor Spirit, the floating of the exchange rate of the Naira and other policies adopted by the government were envisaged to positively impact the economy in the medium term.
These measures, he said, were expected to boost investors’ confidence, attract fresh capital into the economy, stimulate domestic investment and ultimately improve the country’s external reserves, while contributing to the stability of the domestic economy.
Noting the challenges posed by the local and global economic environment, Cardoso said the country’s financial sector has remained resilient, with key positive indicators of financial soundness above average regulatory benchmarks.
In brief review of his predecessor’s performance, Cardoso disclosed that the Emefiele-led CBN embarked on a number quasi-fiscal policies that saw the apex bank staking about N10 trillion in various intervention activities in the economy through unorthodox deployment of monetary policy tools without clarity between fiscal and monetary policies.
He identified those areas of intervention the CBN went into with limited expertise to include agriculture, aviation, power, youth development, among others, which distracted the CBN’s from achieving its core objectives and mandate.
The President of the CBN, Ken Opara, in his remarks shared the economic and financial market development perspectives in the current year as well as insights into the outlook for the coming year.
Opara commended the CBN governor for some of policy initiatives since assumption of office aimed at repositioning and stabilising the economy, including focusing on the core mandate of the CBN on pricing and exchange rate stability, unification of the exchange of the Naira, and initiation of steps to boost liquidity in the foreign exchange market and achieving real positive change in the economy.