Cardoso Must Clear FX Backlog, Create Autonomous Forex Window—CPPE
By Adedapo Adesanya
The Centre for the Promotion of Private Enterprise (CPPE) has called on the newly appointed Governor of the Central Bank of Nigeria (CBN), Mr Yemi Cardoso, to clear the backlog of foreign exchange as well as guarantee another recapitalisation in the banking sector.
“The clearance of the backlog of forex obligations should be accorded high priority to restore the confidence of domestic and foreign investors,” the Managing Director of CPPE, Mr Muda Yusuf said in a press statement titled Ten Point Agenda For The CBN Governor, released over the weekend.
Mr Cardoso and four new deputies on Friday took over the helm of affairs at the apex bank in an acting capacity ahead of his possible confirmation by the Senate this week.
Mr Yusuf tasked Mr Cardoso with the implementation of policies to deepen stakeholder engagement and strengthen the efficiency of the financial system.
He suggested that the newly appointed CBN management team should, in addition to the existing Investor and Exporter (I&E) FX exchange window, “create an autonomous window in the banking system where the currency can trade freely without any encumbrances,” to help reduce dependency on alternative FX windows.
Mr Yusuf also called for the new CBN governor to ensure the recapitalisation of banks, more than 20 years since the last exercise happened.
“During the banking consolidation exercise of 2004, the minimum capital requirements for banks were raised from N2 billion to N25 billion. The revised capital requirement was an equivalent of $187 million.
“Today, the same N25 billion is equivalent to just $32.5 million. This is a clear indication of the phenomenal erosion of the capital base of the banks.
“Recapitalisation of the banks has, therefore, become imperative. It is important to ensure that the capital base of banks can support their current exposures in the interest of the financial system’s stability.”
According to Mr Yusuf, another issue before the new CBN leadership is deepening the financial intermediation role of the Deposit Money Banks (DMBs), which is their primary role in an economy.
“This responsibility entails the mobilisation of financial resources from the surplus end of the economy to the deficit segment of the economy. Financial conditions remain very tight for the private sector amid challenges of access and cost of credit.
“Banking system credit to the private sector in Nigeria, as of 2022, was a mere 20.6 per cent of the nation’s GDP, as sub-Saharan average of 28 per cent and global average of 145 per cent.
“Besides, small businesses, which account for an estimated 50 per cent of the GDP, have access to just about one per cent of the credit in the banking system. The implication is that the banking system is still largely disconnected from the investing community, especially the small businesses in the economy.
“The financing gap in the small business space has been estimated at over N600 billion. This anomaly needs to be corrected. All these underscore the need to deepen synergy and complementarity between the banking system and the economic players, especially the MSMEs.”
He proposed that the new CBN leadership should address the efficiency of the financial system, particularly the high spread between deposit and lending rates in the Nigerian banking system, which indicates significant efficiency problems.