CBN Contemplates Mergers & Recapitalisation of Nigerian Banks

Governor of the Central Bank of Nigeria (CBN) Godwin Emefiele, has said there are plans for a recapitalisation exercise for Deposit Money Banks (DMBs) in the country.

Emefiele disclosed this on Monday June 24 while launching the five-year plan of the CBN.

Bank recapitalisation changes the capital structure of a bank to provide more equity funds to meet the bank’s long-term financing needs for the security of shareholder’s fund.

The CBN had announced the recapitalisation of the banking sector from N2 billion to N25 billion in July 2004, which took effect from December 31, 2005 – a development that led to the reduction of number of Nigerian banks from 89 to 24.

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“We will continue to improve our on-site and off-site supervision of all financial institutions while leveraging on data analytics and our in-house experts across different sectors to improve our ability to identify potential risks to the financial system as well as risks to individual banks,” he said.

“In the next five years, we intend to pursue a programme of recapitalising the Nigerian banking industry so as to position Nigerian banks among the top 500 in the world.

“Banks will, therefore, be required to maintain a high level of capital as well as liquid assets in order to reduce the impact of an economic crisis on the financial system. With a rise in digital payment and cybersecurity threats.”

According to Emefiele, the apex bank will continue to defend the naira within the next five years as there are no plans to float the naira.

He added that the move would “reduce the impact that exchange rate volatility could have on our economy.”