The Governor of the Central Bank of Nigeria, Dr Olayemi Cardoso, has said that the apex bank will be asking Deposit Money Banks to increase their capital base in order to service the $1tn economy projected by President Bola Tinubu.
This is as he noted that he knew that there was much work to be done in the way the apex bank ran its operations, adding that he would need the collaboration of all stakeholders.
Speaking on Friday at the 58th Annual Dinner of the Chartered Institute of Bankers of Nigeria in Lagos where he was the special guest of honour, Cardoso said, “In my recent speech at the 370th Bankers’ Committee meeting, I highlighted the economic agenda of the President. The administration has set an ambitious goal of achieving a GDP of $1tn 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 adequacy of our banking industry to serve the envisioned larger economy.
“It is not just about its current stability. We need to ask ourselves, can Nigerian banks have sufficient capital relative to the finance system needs in servicing a $1tn economy in the near future, in my opinion, the answer is no, unless we take action. As a first test, the central bank will be directing banks to increase their capital.
“Therefore, we must make difficult decisions regarding capital adequacy. As the first step, the CBN will be directing banks to increase their capital.”
He added that it was crucial to prioritise price stability to safeguard the livelihood of Nigerians.
He also blamed the recent negative perception of the apex bank on corporate governance failure, diminished independence and deviation from the core mandate, inefficient forex rules, and venture into development financing.
“I’m confident and optimistic that by taking appropriate corrective actions and strategic steps, we can restore macroeconomic stability and address fundamental flaws,” he stated.
Cardoso also noted that the fluctuating exchange rate was hampering business growth and promised to be transparent and fair to all as the bank performs its function.
He added, “The removal of petrol subsidy and the adoption of a floating exchange rate and other government policies are anticipated to have a positive effect on the economy in the medium term.
“These measures are expected to enhance investors’ confidence, attract capital inflow, stimulate domestic investors and ultimately improve the level of external reserves. Additionally, they are expected to contribute to the stability of the local economy.
“Despite the challenging global and local economic environment, Nigeria’s financial sector has demonstrated resilience in 2023 with key indications of financial soundness largely meeting regulatory benchmarks.
“Stress test conducted on the banking industry also indicates its strength under mild to moderate scenario on sustained economic and financial stress. Although there is room for further strengthening and enhancing resilience to shocks. Therefore, there is still much to be done in fortifying the industry for future challenges.”
Cardoso also noted that the previous forex ban on those 43 items widened the gap between official and parallel market rates.
Speaking on the activities of the CBN before his appointment, Cardoso stated that the quasi-fiscal policies of his predecessor, Mr Godwin Emefiele, resulted in N10tn being pumped into the economy through intervention programmes.