CBN Insists Banks Must Recapitalise to Fund, Power $1 Trillion Economy

•Says banking industry remains sound, building resilience amid global emergencies 

•Oliver Alawuba urges apex bank to release CRR to fund infrastructure, create other incentives for long-term financing

Abiodun Eromosele, Ndubuisi Francis, James Emejo and Nume Ekeghe in Abuja

The Central Bank of Nigeria (CBN), yesterday said it was inevitable to order the recapitalisation banks to fund, finance, and power the proposed $1 trillion economy by 2030.

CBN Deputy Governor, Corporate Services, Ms. Emem Usoro, also said improving banks’ capital base will help them to favourably compete globally with their peers in other climes.

Delivering a keynote address at the opening of the 36th CBN seminar for finance correspondents and business editors, with the theme, “Playing the Global Game: Banking Recapitalisation Towards a $1trilion Economy” in Abuja, Usoro, stressed the need to pay significant attention to bank recapitalisation to ensure that financial institutions remained strong, resilient and stable enough to carry out financial intermediation, and the much-needed financing of development projects and programmes.

While acknowledging that building a $1 trillion economy was a herculean task, she said it would require careful planning, robust and clear policy direction, dutiful implementation, and averred commitment from stakeholders that would galvanise the various sectors of the economy.

Represented by the acting CBN Director, Corporate Communications Department, Mrs. Sidi Ali- Hakama, Usoro noted that the global financial system and architecture had assumed a new dimension even before the new administration of United States President Donald Trump.

This came as Group Managing Director/Chief Executive, United Bank for Africa (UBA)/ Chairman, Body of Banks’ CEOs in Nigeria, Mr. Oliver Alawuba, called on the apex bank and fiscal authority to create incentives for long-term lending through policy support.

He said the central bank should consider releasing part of the Cash Reserve Requirement (CRR) for Deposit Money Banks (DMBs) which is currently at 50 per cent, to allow banks finance long-term investment required to achieve double-digit boost growth to attain the $1 trillion economy.

Usoro however, noted that globalisation had broken the limits of financial flows, and investors have inadvertently taken full advantage of the opportunities.

The CBN deputy governor, however, pointed out that countries and their financial systems must be prepared to utilise opportunities created by financial globalisation through appropriate policy support and actions.

She noted that the Nigerian banking system had also undergone reforms, including bank recapitalisation and consolidation exercises.

She said, “The 2004 banking sector consolidation and recapitalisation exercise, which set a limit of N25 billion minimum capital base for banks, brought the Nigerian banks from 89 to 25, was a noble idea that the Central Bank of Nigeria implemented in line with emerging developments at that time.

“Today, our economy is valued at approximately $250 billion. As we aspire to build a $1 trillion-economy, all hands must be on deck…This gathering is essential to bring to the fore the bank’s efforts and policy direction.

“The push for a recapitalisation of banks would no doubt improve the strength and health of the financial system, deepen financial intermediation and promote healthier competition that would strengthen our payment system.”

However, CBN Director, Banking Supervision Department, Dr. Olubukola Akinwunmi, who spoke on the regulatory aspect of the seminar theme, said the apex bank’s drive to recapitalise the banks was not as a result of perceived problems in the industry but to prepare for future emergencies including the recent global trade tariffs imposed by Donald Trump.

He said the industry was already building resilience to global economic challenges through the recapitalisation of financial institutions.

Akinwunmi said despite the emerging global scenario, banks are committed to funding critical growth sectors, including agriculture, infrastructure and manufacturing, to achieve the $1 trillion economy.

He maintained that Nigerians banks remained on sound footing with all indicators and prudential thresholds within approved limits.

The central bank director also pointed out that the emerging global dynamics was not lost on the apex bank which was why it started early by ordering the banking industry recapitalisation.

He said the recapitalisation programme was currently mid-stream with immense progress so far achieved.

Among other things, he said banks are better positioned to attract Foreign Direct Investments (FDIs) amid rising banking credibility occasioned by monetary policy reforms.

He said macroeconomic indicators including the nation’s reserves and foreign exchange rate have greatly improved. 

In his paper presentation, Group Managing Director/Chief Executive, United Bank for Africa (UBA)/ Chairman, Body of Banks’ CEOs in Nigeria, Mr. Oliver Alawuba, who provided the industry perspective of the theme, called for incentives for long-term lending through policy support.

Specifically, he said there should be tax breaks for banks funding infrastructure/mining as practiced in Brazil and China.

According to him, the government should offer tax incentives for recapitalisation-linked investments, and allow partial CRR refunds tied to infrastructure financing, and create enabling legislation for long-term capital mobilisation.

He said the road to a $1 trillion economy will not be paved by wishful thinking, but by decisive action, bold reforms, and visionary leadership.

He also said achieving results would require consistent policies that inspire investor confidence, effective regulation that enables innovation, strategic partnerships across public and private sectors, and a committed press that tells the full story of transformation.

He said the path to a $1 trillion economy will be defined by how effectively the financial sector mobilises capital, supports critical infrastructure, strengthens the real sector, and accelerates digital transformation, noting that strong economies are built on the foundations of strong banks.

Alawuba noted that the banking recapitalisation represented a landmark policy shift, aimed at aligning the strength of Nigeria’s financial system with its economic ambitions.

He said, “It is a necessary and strategic step toward achieving the vision of a $1 trillion economy. As banks, we view this as a compliance issue and an opportunity to re-imagine our role as economic enablers.”

The UBA GMD said, “This is the moment for Nigeria’s banking industry to rise – to lead in compliance, vision, innovation, and economic stewardship. Let us re-imagine banking as a force for national development and let us commit ourselves to building an economy that works for every Nigerian.

“Banking recapitalization is more than a regulatory exercise; it is the foundation of Nigeria’s economic renaissance. Stronger banks mean stronger capacity to finance the sectors that matter most – infrastructure, mining, manufacturing, technology, and housing.”

He said to achieve the $1 trillion economy, Nigeria must harness its vast mining potentials to drive the economy and unlock new opportunities in mining, digital innovation, nurturing home-grown unicorns, and contract manufacturing.

According to him, mining had proven to be a major driver of economic transformation across Africa contributing 39 per cent to total export revenue in Ghana, 25 per cent of GDP in recent years and attracting $3 billion in new gold projects between 2015 and 2020 in Mali among others.

He said, “A well-diversified economy is essential to achieving resilience and inclusive prosperity. Recapitalized banks must look beyond oil and gas, and channel capital to high-growth sectors (ICT, mining, agriculture, renewable energy, creative industry and manufacturing). One of the most promising sectors is mining, which offers significant potential for GDP growth, foreign exchange earnings, and employment creation.”

He said Nigeria’s banking sector remained undercapitalised and under-leveraged, adding that the country must build bank assets closer to between 80 per cent and 100 per cent of GDP to be globally competitive.

Among other things, he said infrastructure funding has to be undertaken by Nigerian banks which he said have the capacity to fund big ticket projects.

He also identified regulatory and policy constraints, financial accessibility, global headwinds, infrastructure deficit, global competition, FX volatility, governance framework as challenges to achieving the one-trillion-dollar economy.