A don, Professor Ochei Ikpetan of the Department of Banking and Finance of Covenant University, Ota, Ogun State, has advocated that recapitalization will significantly enhance the financial health performance of deposit money banks in the country.
Professor Ikpetan expressed this opinion while delivering his inaugural lecture on Friday April 28 which was the 29th one of the university.
He said, “Reforms remain a major tool for banking soundness, especially in the light of the global financial meltdown.
“Therefore, there is needed for another review of bank’s minimum paid up capital of N25 billion to avert the danger of pre 2005/2006 era where all the banks in Nigeria put together were not up to one bank in South Africa, Malaysia etc, this which is evident from the exchange rate of the dollar/naira.”
He added, “In the light of the recent free fall in the exchange rate of naira to dollar, the evidence from one of my studies shows that recapitalization will significantly enhance the financial health performance of deposit money bank but may not impact on their profitability except with good management.”
“Therefore with the current slide in the exchange rate, Nigerian banks cannot lend to the real sector without eroding their capital base,” he noted.
It will be recalled that Central Bank of Nigeria (CBN) Governor, Godwin Emefiele, had pledged to reposition Nigerian banks through recapitalisation during his second term.
He said that recapitalisation of Nigerian banks was long overdue because it was done last in 2004 by Charles Soludo, a former governor of the apex bank.
“We will pursue the programme of recapitalisation of our banks in the next five years to ensure they are among the top 500 in the world.
“It is Soludo that did the last recapitalisation of banks in 2004 from two billion naira to N25 billion.
“If you relate N25 billion to present exchange rate, you realise is lower than 75 million dollars.
“The then recapitalisation has been weakened and there is need to recapitalise and reposition the Nigerian banks,” he said.
Emefiele had also said in the next five years, the CBN under his leadership would work with deposit money banks to enable Micro, Small and Medium Enterprises (MSMEs) have access to credit.
Please like and share with others.
Is fresh recapitalization good for Nigerian banks?
Let’s see your reaction in the comment section below now