Re-capitalisation: Economist urges banks to ensure positive impact - Saga Gist - Top Source for Nigeria News

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Wednesday, June 26

Re-capitalisation: Economist urges banks to ensure positive impact




An economist, Dr Boniface Chizea, has urged commercial banks and the Central Bank of Nigeria (CBN) to work together to ensure the proposed re-capitalisation had positive impacts on their operations and economy at large.
Chizea, the Chief Executive Officer, BIC Consultancy Service, made the assertion in an interview with the News Agency of Nigeria (NAN)  in Lagos, while reacting to the Apex bank’s unveiling of the 2019-2024 policy direction.
NAN reports that the CBN Governor, Mr Godwin Emefiele, had on Monday in Abuja during the unveiling of his economic agenda for the next five years expressed the readiness to increase banks’ capital base.
Emefiele noted that the drop in the value of the Naira to the Dollar had weakened the capital of banks.
Chizea commended the CBN governor for thinking through the process and putting down his stance for the growth of the economy.
According to him, the proposed capital base will help to improve financial stability.
“When you have a well laid out plan, it gives you a clear vision on how to go about it.
“The CBN can use it at interval to check if the bank is on course and to know how well it is doing, regarding the plans.
“Also, the fiscal authority will have to cooperate with him because his own responsibility is on monetary policy.
“For instance, the CBN usually embarks on tight monetary policy by seeking to reduce the demand for money and limit the pace of economic expansion. The aim of tight monetary policy is usually to reduce inflation.
“On the other hand, fiscal authority adopts expansionary measures such as: “Having budget deficit and printing money to cover the deficit when they can not borrow.”
He said the proposed re-capitalisation as an argument was quite cogent because it was based on the present realities in the country.
According to him, the last re-capitalisation exercise was looked at in terms of exchange rate.
“In 2004 to 2005, when Prof. Charles Soludo made the banks to change their capital base from N2 billion to N25 billion, then, it was like about N100 to a dollar.
“So, he converted their capitals from Naira to dollar and showing us that from then to now, it has been quite a loss.
“Look at the banks to see if their capital base is causing any problem.
“This is because the capital is used to put a structure in place and as insurance, it is not meant to be used for business,” he added.
The financial expert said that increase in banks’ capital base would boost the amount of single obligation that customers could get.
He, however, noted that there could be consultation with the bank chiefs prior to implementing the plan and which might lead to an adjustment. (NAN)