The Central Bank of Nigeria (CBN) has urged commercial banks to channel the N4.65 trillion raised under the recently concluded banking sector recapitalisation programme into increased credit for businesses, infrastructure development and other productive activities. This call was made by the Deputy Governor of the CBN in charge of Corporate Services, Dr. Muhammad Sani Abdullahi, at the 38th Seminar for Finance Correspondents and Business Editors.
According to Abdullahi, the success of the recapitalisation exercise would ultimately be determined by how effectively financial institutions deploy their strengthened capital bases. He disclosed that 33 banks had satisfied the revised minimum capital requirements at the conclusion of the two-year recapitalisation programme announced in March 2024. The programme has significantly strengthened the financial positions of banks.
The recapitalisation programme has provided banks with additional capacity to finance large-scale infrastructure projects, support industrial development, facilitate international trade and compete in regional and international financial markets. However, Abdullahi cautioned that raising additional capital alone would not guarantee a stronger financial system unless banks complemented their improved financial positions with effective corporate governance and prudent lending practices.
Abdullahi emphasised that the post-recapitalisation period must be characterised by a measurable improvement in the banking sector's contribution to economic development. He noted that financial institutions must develop credit facilities that reflect the operational realities of businesses, including their cash flow requirements and the longer investment periods associated with major productive projects.
The CBN deputy governor linked the recapitalisation programme to the Federal Government's broader economic ambitions, explaining that achieving the targeted expansion of the Nigerian economy would require financial institutions with substantially greater capacity to mobilise domestic and international investment. Nigeria's aspiration to build a one-trillion-dollar economy by 2030 requires banks capable of mobilising and allocating capital on a much larger scale.
Abdullahi also highlighted improvements in Nigeria's foreign exchange market, external reserves, inflation and economic growth. He attributed the progress to a combination of monetary policy measures, oil receipts, remittance inflows and global financial conditions. The average disparity between the official and parallel market exchange rates has narrowed considerably following the foreign exchange reforms introduced by the CBN in 2023.
The CBN will sustain its regulatory oversight of the banking industry, with particular attention to corporate governance, asset quality, liquidity management and large credit exposures that could threaten financial stability. Abdullahi warned that the benefits of recapitalisation could be undermined by weak corporate governance, poor credit decisions and inadequate oversight.
Key points
- The Central Bank of Nigeria has urged commercial banks to channel the N4.65 trillion raised under the recapitalisation programme into productive sectors to support economic growth.
- The recapitalisation programme has strengthened the financial positions of banks, providing additional capacity to finance large-scale infrastructure projects and support industrial development.
- The CBN will sustain its regulatory oversight of the banking industry to ensure that banks deploy their strengthened capital bases effectively.
