CBN Mulls Fresh Capitalisation for Nigerian Banks, Adopts Inflation Target Framework

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By Adedapo Adesanya 

The Central Bank of Nigeria (CBN) would likely direct banks to increase their capital base in the coming months as part of a new policy push towards a $1 trillion Nigerian economy.

The Governor of the apex bank, Mr Olayemi Cardoso, said this while delivering his keynote address at the 58th Annual Chartered Institute of Bankers of Nigeria (CIBN) dinner in Lagos on Friday.

The new CBN chief used the event to unveil the bank’s monetary policy thrust and economic outlook for 2024, following the cancellation of the Monetary Policy Committee (MPC) meeting for the quarter.
“We must make difficult decisions regarding capital adequacy. As the first steps, the CBN will be directing banks to increase their capital.”
Mr Cardoso also said the bank would likely not hold MPC meetings this year anymore, considering it has fulfilled the mandatory four times a year stipulated by bank laws. At the last rate-setting meeting in July, the bank raised rates by 25 basis points to 18.75 per cent and since then inflation has jumped by 4.53 per cent from 22.8 per cent to 27.33 per cent (October 2023).
He noted that the CBN is committed to fixing the transmission of monetary policy which he said is the core priority, adding that the lender will introduce an inflation-targeting framework, which will be formally introduced.
“As part of this new focus, the CBN has approved the adoption of an explicit inflation-targeting framework to enhance the effectiveness of monetary policy,” he added.
He also indicated that the tightening of interest rates will continue for at least two quarters in 2024.
For the foreign exchange market, Mr Cardoso said the country should expect new FX rules, noting that it is in extensive consultation with banks toward achieving this.
“CBN is committed to market forces determining the FX rate,” he said.
He also noted that the CBN has made tranche payments to 31 banks to clear FX forwards which are around $6 billion, with “a focus on legitimate transactions,” however, the CBN helmsman didn’t disclose the amount disbursed to the banks.
“We are witnessing clear progress in stabilising the foreign exchange market,” he claimed.
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