LCCI Demands Transparency in CBN Recapitalisation Plan

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By Adedapo Adesanya

The Lagos Chamber of Commerce and Industry (LCCI) has urged the Central Bank of Nigeria (CBN) to strengthen its banking supervision to prevent some crucial Nigerian banks from failing due to its planned recapitalisation.

Last Friday, the Governor of CBN, Mr Olayemi Cardoso, said the CBN would be directing banks to increase their capital base to serve a $1 trillion economy to be achieved by 2030.

In a statement signed by Mrs Chinyere Almona, the director general of LCCI, the chamber said, “On recapitalisation of banks, we commend the plan of the apex bank to review the minimum capital base of banks due to consistent devaluation of the naira, which has eroded the capital base of banks, attracted significant investment into banks as well as increased the capacity of banks to provide the required support for the economy.”

It added that given the sensitivity of monetary policy and price stability, “we urge the CBN to ensure transparency and synergy between monetary and fiscal authorities and effectively communicate significant changes in policy direction.”

“We caution the CBN to strengthen its banking supervision to avoid too big to fail banks,” LCCI said.

During the announcement of the plans by Mr Cardoso at a bankers’ dinner a week ago, he quipped that, “We need to ask ourselves: Will Nigerian banks have sufficient capital relative to the financial system’s needs in servicing a one trillion dollar economy in the near future? In my opinion, the answer is “No!” unless we take action. Therefore, we must make difficult decisions regarding capital adequacy”.

Nigerian banks’ capital adequacy ratio, which measures a bank’s financial strength by using its capital and assets, declined to 11.2 per cent in June 2023 from 13.0 per cent in May, though still within the prudential requirement of between 10 per cent and 15 per cent.

“Over the years, the chamber has consistently expressed concerns about the implications of high inflation, high interest rate, and unstable exchange rates on businesses and households,” Mrs Almona said.

She added that LCCI was aware of the enormous challenges and the uphill task before the CBN in ensuring macroeconomic stability and restoring investors’ confidence.

“However, we note the inconsistencies between the federal government’s vision of achieving a $1 trillion economy in the next six years and the medium-term expenditure framework (MTEF),” she added.

According to Mrs Almona, the macroeconomic projections in the MTEF state that the economy will grow by 3.76 per cent, 4.22 per cent, and 4.78 per cent in 2024, 2025, and 2026, respectively.

“We note that the projected growths are sub-optimal to achieve a $1 trillion GDP by 2029, which implies an average growth of 21 per cent over the next six years.”

LCCI recommends that the CBN adopt the right policy mix to control high inflation effectively and ensure the stability of the exchange rate to support growth and job creation.

“Furthermore, we stress the need for the Bank to be committed to promoting integrity, good corporate governance, and the highest ethical standards

The LCCI also lauded the CBN governor for admitting the errors or mistakes of the past, particularly in the areas of corporate governance failures, diminished institutional autonomy of the CBN, deviation from the core mandate of the bank, and unorthodox use of monetary tools and foray into fiscal activities under the cover of development finance activities.

“As we advance, we challenge the current CBN team to ensure professionalism and integrity and rebuild the trust of the general public.”

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