Bank recap: customers seek cheaper loans as exercise ends today
Bank recapitalisation which started two years ago, has ended today. President, Bank customers Association of Nigeria (BCAN), Dr. Uju Ogubunka, said the exercise, which saw 32 banks raising N4.61 trillion
- Loan seekers urge CRR review of N4.61tr raised funds
- By Collins Nweze, Assistant Editor
Bank recapitalisation which started two years ago, has ended today. President, Bank customers Association of Nigeria (BCAN), Dr. Uju Ogubunka, said the exercise, which saw 32 banks raising N4.61 trillion presented opportunity for the lenders to provide cheaper loans, expand their operations and provide improved services to customers.
“The banks have raised significant funds to shore up their capital bases. Now, we expect them to improve on service quality and shun excess charges,” he said.
Managing Director, Economic Associates, Dr. Ayo Teriba, urged the Central Bank of Nigeria (CBN) to review Cash Reserve Ratio (CRR) policy to allow banks utilise funds raised from the recapitalisation exercise.
He said that with Ways and Means dropping from N27 trillion to N3 trillion and stability in exchange rate, and adequate FX reserves, the CBN should rescind the policy on CRR to allow banks intermediate.
The CBN pegged Cash Reserve Requirement (CRR) for Deposit Money Banks at 45.00 per cent, Merchant Banks at 16.00 per cent, and 75.00 per cent for non-Treasury Single Account (TSA) public sector deposits.
Also speaking, President, Association of Bureaux De Change Operators of Nigeria (ABCON), Dr. Aminu Gwadabe, agreed with Ogubunnka on the need for low interest loans.
Gwadabe said: “We need cheaper loans. Big capital should reflect on cheaper and more affordable loans. Also, banks should lend for longer terms, and projects that support the economy.”
He said that more capital will increase banks’ buffers and hasten Nigeria’s path to achieving $1 trillion economy.
“Now they have bigger capital, we expect the banks to come out and compete with other global banks. The Nigerian banks need to compete favourably at international stage,” he said.
Continuing, Gwadabe said the era of high lending rates should also be over. “ We expect the interest charged by banks on loans to reflect international standards. We equally want the banks to de-risk agriculture to improve food security,” he said.
The CBN had, on March 28, 2024 announced a two-year bank recapitalisation exercise which commenced on April 1, 2024.
The recapitalisation plan requires minimum capital of N500 billion, N200 billion and N50 billion for commercial banks with international, national and regional licences respectively. The 24-month timeline for compliance ends on March 31, 2026.
CBN Governor, Olayemi Cardoso, said the apex bank will be enforcing stronger governance, greater transparency, and firmer accountability to protect raised funds.
The CBN has equally established a dedicated Compliance Department, now fully operational, with mandates covering financial crime supervision, market conduct, enterprise security, corporate governance, and Environmental, social, and governance (ESG).
According to the CBN boss, the process enforcing stronger controls on raised funds is ongoing with the redesigning of the credit risk framework expected to ensure that raised funds are well managed by financial institutions.
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Previously, banks were awash with post recapitalisation funds, with analysts predicting that without proper risk management policies and regulatory controls, chances of misapplying such raised funds through risky loans remain high.
To guard against such occurrence, Cardoso stated: “We are redesigning the credit risk framework to enforce stronger governance, greater transparency, and firmer accountability across the sector. We are determined to break the boom and bust cycle that has accompanied past recapitalisation efforts”.
In a report titled: “Nigeria’s macro headwinds trigger bank recapitalisation” Deloitte, a global accounting and audit firm, said the upward review of banks’ capital base from N50 billion to N500 billion depending on the type of licence held by the bank, remains an essential action required to boost capital adequacy needs of the Nigerian financial industry.
Nigeria banks’ capital adequacy, the report says, has been significantly impacted by macroeconomic challenges such as high inflation and interest rates, currency volatility and forex illiquidity.
“The upward revision will ensure that Nigerian banks have the capacity to take on bigger risks and stay afloat amid both domestic and external shocks. It also means increased liquidity position of banks, which will help broaden their loss-bearing capabilities,” the report said.
