Latest news with #OlayemiCardoso
Business Insider
20-05-2025
- Business
- Business Insider
CBN holds monetary policy rate at 27.5% amid economic adjustments
Nigeria's Monetary Policy Rate (MPR), the nation's benchmark interest rate, has been kept at 27.5 percent by the Central Bank of Nigeria (CBN) through its Monetary Policy Committee (MPC). The Central Bank of Nigeria maintained the Monetary Policy Rate at 27.5%. Governor Olayemi Cardoso highlighted unanimous support for the decision by the Monetary Policy Committee. Key macroeconomic improvements were noted, including narrowing exchange rate gaps and food inflation moderation. Following Tuesday's MPC's 300th meeting, CBN Governor Olayemi Cardoso revealed the decision at a press event in Abuja. The CBN governor noted that the committee's decision was unanimous, highlighting the necessity of exercising caution as Nigeria negotiates continuous economic changes. Before making any more changes, he said, the MPC thinks that keeping the interest rate at its current level will enable it to monitor and evaluate short-term economic trends. The committee decided to keep the liquidity ratio at 30% and the cash reserve ratio (CRR) at 50%. 'MPC noted the relative improvements in some key macroeconomic indicators expected to support the overall moderation in crisis in the near to medium term,' Cardoso said. 'These include the progressive narrowing of the gap between the Nigerian foreign exchange market, bureau de change (BDC) windows, the positive balance of payments position, and the easy price of PMS. The members also noted with satisfaction the progressive moderation in food inflation and, therefore, commended the government for implementing measures to increase food supply, as well as stepping up the fight against insecurity, especially in farming communities. The committee thus encouraged security agencies to sustain the momentum while the government provides necessary inputs to farmers to further boost food production.' However, according to the governor of the CBN, the committee recognized that there were underlying inflationary pressures, primarily caused by high electricity costs, ongoing need for foreign exchange, pressure, and other legacy structural elements, as seen on the Cable. 'The MPC noted new policies introduced by the federal government to boost local production, reduce foreign currency demand pressures, and thus lessen the pass-through to domestic crisis,' he said. 'Given the relative stability observed in the foreign exchange market, members urged the bank to sustain the implementation of the ongoing reforms to further boost market confidence,' he added. This decision underscores the committee's commitment to managing inflationary pressures while maintaining economic stability. The MPR is the principal instrument for regulating interest rates in the financial system, affecting loan costs, investment activity, and overall economic development.
Zawya
06-05-2025
- Business
- Zawya
Nigeria: CBN tackling FX speculations, narrowing exchange rate disparities
The Central Bank of Nigeria (CBN), deploying various reform measures, has curtailed the once-wide gap between the official and parallel market rates, curbed speculative arbitrage in the nation's foreign exchange (FX) market, writes JOSEPH INOKOTONG The Central Bank of Nigeria (CBN) has activated market-driven pricing for the naira, significantly enhancing transparency and restoring investor confidence. With disciplined reforms and policy clarity, the naira has stabilized at a more sustainable level against the U.S. dollar. The once-wide gap between the official and parallel market rates has all but disappeared, a first in Nigeria's recent history, and speculative arbitrage has all but vanished. The battle to close the gap between the official market rates and parallel market rates has been raging for decades, with little to show for it. That was until the CBN-led reforms started and closed the huge gaps between both markets. For instance, while the naira exchanges at N1,599/$1 at the official window, the local currency exchanges at N1,600/$1, representing a meagre N1 gap between both rates. Speaking on the development, CBN Governor, Olayemi Cardoso, said the renewed stability in the exchange rate has restored confidence in the market and spurred autonomous forex flows to the economy through formal channels. According to him, the forex inflows are diversifying Nigeria's forex sources beyond oil, with large funds coming from diaspora remittances and export proceeds. The stability in exchange rate has been applauded by market watchers, including the now popular Fitch Ratings, which upgraded Nigeria's ratings, citing the exchange rate unification to reduce arbitrage in the markets, introduction of electronic FX matching platform and a new FX auction system. The monetary policy tightening to keep inflation in check. Cardoso said, 'The numbers speak for themselves. The difficult reforms that were initially a tough call to be taken by the orthodox monetary policy are a route we can't compromise on. For adopting orthodox monetary policy, we have been able to stabilise the naira and restore the confidence of the economy.' He said that the apex bank has strengthened its external buffers and positioned Nigeria to better withstand external shocks. Continuing, 'Indeed the macroeconomic stability we are beginning to see today would not have been possible without these decisive actions. Nigeria's external buffers have strengthened to the extent our foreign reserves now stand at close $34 billion, from declining reserves of about $32 billion. This robust buffer enables us to better monitor the interest of shocks – whether from declining oil prices or global financial turbulence – thereby safeguarding the value of the naira.' He said the country currently holds its strongest external reserves, with a balance of payments surplus of $3.61 billion, the strongest since 2019. 'Our trade balance has also improved significantly due to a notable increase in exports, particularly of oil and agricultural products. These factors have significantly contributed to the recent stability in the exchange rate and overall economic environment,' he said. 'We are beginning to see improvements in the current account position, reflecting a surplus in the balance of payments and an increase in capital inflows. These improvements are expected to support the naira and reduce the need for central bank intervention in the foreign exchange market,' Cardoso added. Cardoso explained that this is a period of heightened uncertainty globally, and hence, a time for tough decisions. 'In the midst of these challenges, there has been a lot the economy has had to go through, but we are also seeing that the economy is emerging stronger and more resilient. We have moved from a period of extreme vulnerability brought on by compound shocks, and now on the course of rebuilding confidence in our FX market, driven by reform momentum. We will continue to stay on the path of reform to fully reap the benefits and build our gains in stability and resilience.' Wooing global investors for growth Speaking during just concluded Spring Meetings of the IMF/World Bank Group in Washington, DC, at the Nigeria Investor Forum organised by JP Morgan in Washington DC, Cardoso said the adoption of orthodox monetary policy will be sustained, because it has helped the economy to navigate a difficult path to a point of stability. He said the foreign investors have seen these developments and raised their investments and commitments in the domestic economy. He spoke about recommitments to investment flows and closing the gaps in the exchange rate. He said the apex bank reached out to the diaspora communities, who are showing more commitments to investing in the economy. Cardoso explained that this is a period of heightened uncertainty globally, but he has been able to, in the midst, during his short tenure, steer again back to the path of progress, even through the difficult things the CBN has done. He said that in spite of the challenges, the economy is navigating through a difficult path, but one that is now becoming clearly stable and that all investors need to be on, and when they invest, it becomes profitable in the long run. He also said that Nigeria's external reserves are robust and can withstand global economic shocks. In addition, a report released by the Nigerian Economic Summit Group (NESG) showed that Nigeria recorded a significant increase in foreign portfolio investment, marking a further step in its CEO's strategy to strengthen its presence on the African continent. Present in Lagos since the 1980s, US bank JP Morgan plans to transform its Nigerian representative office into a fully-fledged branch. 'The New York-based financial institution, managed in Nigeria by Dapo Olagunju, will apply to the Central Bank of Nigeria, CBN, for a merchant banking licence in the coming months,' the report said. If successful, this new US-Nigeria entity will be able to offer Nigerian-based large companies in addition to its advisory and asset management activities. This is part of JP Morgan's strategy to increase its presence on the African continent from its GC–Dubai, which has oversight in Nigeria, Where he met the CBN Governor, Olayemi Cardoso. He also visited South Africa, where JP Morgan has a subsidiary, and Kenya. Before the trip, Dimon stressed that he wanted to strengthen the bank's presence in Africa by adding a country every couple of years or so. JP Morgan has since opened offices in Abidjan, Côte d'Ivoire, and Nairobi, Kenya, to deepen its presence in Africa. The strategy for JP Morgan in Africa is to strengthen countries in issuing Eurobonds. The bank participated in Nigeria's 2024 fundraising on the international market. Nigeria is ready for JP Morgan Index return The Director-General of the Debt Management Office (DMO), Patience Oniha said Nigeria is in advanced discussions with JP Morgan to re-enter the Government Bond Index (GBI) and net new investors' confidence. The DMO boss explained that Nigeria has enjoyed favourable credit assessment among rating agencies in recent times on the back of the sweeping reforms implemented by the CBN. Fitch Ratings had also upgraded the Long-Term Issuer Defaults Ratings (IDRs) of seven Nigerian banks and two bank holding companies to 'B' from 'B-', with the outlooks as Stable. The upgrades of the Long-Term IDRs of the banks followed the recent sovereign upgrade action on Nigeria's IDRs to 'B'/Stable from 'B-'/Stable. The rating agency said it is confident in the issuers' standalone creditworthiness. The rating agency, which also affirmed the Viability Ratings (VRs) of the banks at 'b', stated that 'the rating actions reflect the banks' relative strength and recent performance. These include a consistent operating environment and consistent policies now implemented in the short-to-medium term.' Fitch is aware that the macroeconomic policies in place by the Emefiele-led administration were inconsistent. NESG Director of Research Ayo Akinwunmi said, 'There is a lot of excitement in the investment community because there is a good story to be told, and the international community has started listening. There is now renewed hope, as the country has now been able to change the negative narratives and has adopted a strong macro, monetary, and fiscal stance.' Economic prospects remain positive 'There are so many things we can be proud of as a nation. As many reforms have been applauded by the market watchers. This is not the time to go back. Nigeria is in a stronger place. We've seen improvements in FX market reforms and the Inflation Targeting Framework. As Cardoso himself said, 'It's not an easy path, but it's one that will lead to better outcomes in the long term.'' The IMF had in its recent assessment of Nigeria's economy expressed optimism, projecting the country's GDP to grow at 3.3% in 2024, driven by both oil and non-oil sectors. The Fund noted that the country's economy is on a recovery path, bolstered by the ongoing reforms. The IMF also stated that inflation, although still high, is expected to ease gradually as the effects of monetary tightening take hold. The path to reform may be difficult, but as many analysts agree, it is necessary. If sustained, Nigeria may yet emerge from this period of strategic repositioning with better institutional reforms. He underlined the critical role of investment in driving economic growth. 'Revenue alone is not enough, Rewane stated. 'Investment is key, but it will be influenced by confidence, transparency, and the right policies.' He also called attention to persistent challenges such as power supply inefficiencies and the lack of transparency in the oil and gas sector, which require immediate attention through structural reforms. Rewane said that 2025 is going to be less hard, less painful, and less difficult than last year. He said the fact that things were so difficult in 2024 does not in any way indicate that the difficulties will persist this year. CEO of NGX Regulation Limited, Olufemi Shobanjo, harped on the role of liquidity in capital markets, emphasizing initiatives that enhance investor confidence and ensure market stability. Macroeconomic indicators positive Besides, the CBN has also taken strategic steps to tackle inflation. The apex bank reiterated at the Monetary Policy Forum 2025, featuring fiscal authorities, legislative, private sector, development partners, stakeholders in the FX system, and others who were present. 'Managing' this Department has once again positioned the apex bank toward economic stability, the planned transition to an inflation-targeting framework, and strategies to restore purchasing power and ease economic hardship. The CBN is continuing its disciplined approach to monetary policy to curb inflation and stabilize the economy. Furthermore, the apex bank is rebuilding trust in the FX market, narrowing exchange rate disparities, and achieving price stability. The apex bank preserves over $40 billion as of December 2024. The CBN is also focused on strengthening the banking sector, introducing minimum bank capital requirements (with implementation to commence March 2026) to ensure resilience and position Nigeria's banking industry for a $1 trillion economy,' he said. To further enhance the foreign exchange market, the apex bank introduced the Automated FX Matching and Allocation System, which has been integrated into other market systems. Copyright © 2022 Nigerian Tribune Provided by SyndiGate Media Inc. (
Zawya
01-05-2025
- Business
- Zawya
Nigerian importers, exporters Dollar-transactions negating currency swap gains — CBN
The Governor of the Central Bank of Nigeria, Olayemi Cardoso, during a recent meeting with maritime journalists highlighted the gains of the Nigeria-China Currency Swap Deal. Represented by his Special Adviser; Mr. Anthony Ogufere, the CBN Governor reeled out challenges that have inhibited the deal. TOLA ADENUBI brings the excerpts: CAN you explain the importance of today's conversation? I am honoured to speak on a subject of considerable strategic significance to Nigeria's trade and economic development The Nigeria-China Currency Swap Deal and its implications for the Nigerian economy and, more specifically, the maritime industry. In today's rapidly evolving global financial environment,developing economies are increasingly compelled to adopt innovative policy instruments that will strengthen exchange rate management, deepen trade and investment relations, and boost macroeconomic resilience. This emerging instrument includes the Bilateral Currency Swap Agreement (BCSA), which several countries have embraced. A bilateral currency swap is an agreement between two central banks to obtain foreign currency liquidity from each other as they exchange a specific amount of their currencies at a predetermined exchange rate for a pre-agreed period. The aim is to relieve external funding pressures and exchange rate volatility. How did Nigeria's journey with this agreement begin? Over the past two decades, China has entered bilateral currency swaps with several countries, including Nigeria, in an effort to increase the share of the Renminbi (RMB) in global trade and financial transactions. The People's Bank of China (PBOC) has signed these agreements with central banks on behalf of the country. Through these swap lines, countries are able to settle transactions in RMB directly without the need for a third-party currency (usually the United States dollars). This engagement provides a timely and important platform for examining the objectives, opportunities, and challenges of China Currency swaps, particularly how the swap deal can help to reposition Nigeria's maritime industry 'a vital channel for external trade. Nigeria's journey on BCSA with China began with a series of forward-looking policy decisions, including the strategic move by the Central Bank of Nigeria (CBN) to convert a portion of Nigeria's external reserves to RMB' a clear recognition of China's growing prominence in the global economic environment and the rising internationalisation of the RMB. In 2011, the CBN diversified its reserves by incorporating the Chinese Yuan Renminbi (CNY). This decision was influenced by the growing trade relationship between Nigeria and China, as imports from China to Nigeria peaked in 2017. Can you shed light on the structure of the deal itself? In May 2018, the CBN and the Peoples Bank of China (PBOC) formalised a currency swap agreement valued at RMB 16 billion (approximately US$2.5 billion). By the end of 2024, China became Nigeria's largest trading partner, accounting for approximately 35 per cent of Nigeria's total imports while bilateral trade volumes between the two countries had reached a remarkable US$11.58 billion, according to the National Bureau of Statistics. In response to the rising trade volume between the two countries, the central banks of both countries engaged in a series of negotiations to establish a bilateral currency swap framework. Has the deal been extended since its inception? Yes. Following the successful negotiations, both parties signed a three-year bilateral currency swap agreement valued at 15 billion Chinese Yuan (approximately 720 billion or US$2.5 billion) In 2018. The agreement positioned Nigeria as the third African nation, after South Africa and Egypt, to secure a currency swap deal with China. South Africa had earlier in 2015 secured a three year 30 billion yuan (US$4.8 billion) currency swap with China while Egypt had in 2016 secured a three-year, 18 billion yuan ($2.62 billion) BCSA to facilitate trade and improve Egypt's foreign currency liquidity. The BCSA framework enables banks operating in Nigeria to issue RMB Letters of Credit on behalf of importers, helping facilitate seamless international trade transactions with Chinese businesses. On the other hand, naira liquidity is provided to Chinese firms and investors doing business in Nigeria. The Agreement is designed to eliminate the need for a third-party currency, usually the US dollar. for transactions involving the two countries, thereby reducing the pressure on countries' dollar reserves, transaction costs, foreign exchange risks, and the turnaround time for trade settlements. Also, the currency swap deal provides a platform to strengthen regulatory and financial intelligence cooperation for closer regulatory collaboration in areas such as anti-money laundering, transparency, and illicit financial flow mitigation. Following the conclusion of the initial three-year agreement, there was a call for the renewal of the bilateral agreement by both countries. As such, the agreement was renewed for another three years in April 2021. In December 2024, both parties mutually agreed to extend the deal for an additional three-year period. The extension of the agreement is a testament to the enduring commitment of both countries to improving bilateral financial cooperation. What are the economic benefits of this currency swap agreement? It can lead to a substantial reduction in transaction costs for Nigerian businesses engaged in trade with China. Before the implementation of the swap agreement. Nigerian traders faced the cumbersome and costly process of multi-layered currency conversion procedures, which exposed businesses to higher transaction costs, exchange rate risks, and forex-related delays. The currency swap agreement streamlines this currency conversion process by enabling settlements of trade in naira and renminbi directly. The Agreement can therefore contribute to Nigeria's foreign exchange reserves accretion. The agreement provides an alternative settlement channel with direct access to renminbi liquidity, thus, freeing more US dollar foreign exchange for other critical transactions. In addition, the Agreement positions Nigeria as a credible trade partner in the eyes of China and the global investment community. By facilitating seamless bilateral transactions and reducing currency conversion inefficiencies, the BCSA can strengthen investors' confidence, potentially stimulating higher inflows of Foreign Direct Investment (FDI). This improved financial and trade integration with China can also unlock greater access to infrastructure development financing, positioning Nigeria as a more attractive destination for long-term capital investments. Specifically, how does this impact Nigeria's maritime sector? The significance of the Nigeria China currency swap agreement extends beyond macroeconomic benefits; it could have profound implications for Nigeria's maritime industry, which is the primary conduit for the movement of goods between the two countries. In alignment with this, the Ministry of Marine and Blue Economy is actively working to rehabilitate and modernise existing port infrastructure, strengthen the legislative and policy framework governing the sector, and automate all port processes to ensure import and export processing efficiency. These efforts are expected to complement the currency swap agreement by further streamlining trade processes and reducing transaction costs in the maritime sector. The ease of transaction settlements in local currencies 'facilitated by the swap deal' could provide substantial relief to stakeholders in the shipping and logistics sectors. With Nigerian importers and exporters being able to conduct trade in naira and renminbi, it would enable greater financial predictability and stability, which is critical to the efficient operation of maritime businesses. Moreover, by eliminating the need for third-party currency conversions, the swap agreement will significantly lower transaction costs in the trade value chain, including shipping costs. Reduced costs would translate to greater efficiency and improved trade competitiveness. Are there maritime-specific advantages in terms of financing? Yes. A less obvious but important opportunity lies in vessel financing and maritime asset acquisition. The currency swap can open avenues for Nigerian maritime businesses (such as shipping companies, fishing fleets, or offshore service providers) to finance or purchase vessels and equipment from China on favourable terms given that China is a leading shipbuilder and has export finance programs for vessel sales. The swap agreement could also encourage Chinese investment and partnerships in Nigerian port infrastructure. China's port developers and financiers are very active across Africa, and Nigeria is a prime focus. A case in point is the Lekki Deep Sea Port in Lagos 'a Belt and Road Initiative project built and majority-owned by Chinese firms. China Harbour Engineering Company not only constructed Lekki Port, but also took a 54 per cent stake in the port and helped finance it via the China Development Bank. The success of Lekki Port underscores how attractive Nigeria's maritime sector is to Chinese investors. The simplified settlement process would also result in streamlined port activities, faster customs clearance, with improved availability of trade finance instruments and documentation. Are there any challenges or risks associated with this agreement? Yes. Despite the significant trade and economic benefits, the bilateral currency swap agreement provides, it is not without inherent risks and challenges. A primary concern is Nigeria's persistent trade imbalance with China. Although the swap arrangement has facilitated smoother import flows from China, there has been a disproportionately low export flow to China. In 2023, for instance, Nigeria exported approximately US$2.51 billion worth of goods to China, compared to imports from China of around US$20.00 billion. The composition of Nigeria's exports â€' largely raw commodities such as crude oil, natural gas, and solid minerals limits the inflow of Chinese Yuan and creates an unbalanced trade relationship. The imbalance in trade flows constrains Nigeria's capacity to reap the full benefits of the swap agreement. Another critical challenge is the limited awareness and adoption of Chinese yuan-denominated transactions among Nigerian businesses. Many importers and exporters continue to transact predominantly in US dollars due to entrenched market practices, limited financial literacy, and a lack of proactive sensitisation by financial institutions. Furthermore, this slow uptake of Chinese yuan-denominated trade financing by some Nigerian banks has further inhibited the success of the agreement.
Zawya
21-04-2025
- Business
- Zawya
Nigeria: CBN leads financial dialogue with JP Morgan, NGX, others in pre-spring meetings forum
The Central Bank of Nigeria (CBN) showcased its bold reform agenda at a high-profile global forum at Nasdaq MarketSite in New York, just days before the International Monetary Fund (IMF) and World Bank Group (WBG) Spring meetings. This strategic summit, in collaboration with JP Morgan, the Nigerian Exchange Group (NGX), and the African Private Capital Association (AVCA), marked a pivotal moment in Nigeria's economic renaissance. Under the banner 'The Nigeria Investment Agenda: Pathways for Growth & Global Partnerships,' the forum attracted an influential assembly of global investors, diaspora leaders, and financial power brokers eager to witness Nigeria's economic transformation firsthand. In a commanding address, Governor Olayemi Cardoso unveiled his visionary reform blueprint that has already begun reshaping Nigeria's financial landscape through decisive monetary tightening, revolutionary FX market transparency, and fortified financial governance. 'These reforms aren't merely policy adjustments,' Cardoso emphasized, 'but foundational pillars rebuilding Nigeria's economic architecture for generations to come.' Governor Cardoso declared the CBN's determination to restore market confidence: 'We inherited a crisis of confidence but chose a different path. We're not turning back.' His resolute stance signaled Nigeria's irreversible commitment to financial orthodoxy and stability. The Governor's vision gained further dimension during an illuminating fireside chat with Nobel Prize-winning economist Dr. James Robinson. There, Cardoso articulated his ambitious mission to transform the CBN into a world-class institution commanding respect on the global stage while delivering excellence at home. Reinforcing this narrative of renewal, Deputy Governor Muhammad Sani Abdullahi presented compelling evidence of Nigeria's economic revival, highlighting surging foreign exchange turnover, promising disinflation signals, and strengthening external reserves. 'We're witnessing the green shoots of recovery,' he remarked. 'With our market-determined exchange rate and transparent, rules-based policy framework, international confidence in Nigeria's economy is unmistakably returning.' Dr. Nkiru Balonwu, Adviser to the CBN Governor on stakeholder engagement and strategic communication, framed the forum as a watershed moment in Nigeria's engagement with global markets. 'Today represents more than a conversation, it's an unprecedented opening of the books on the CBN's transformation journey under Governor Cardoso,' she declared. 'We're not just sharing progress; we're co-creating the roadmap for sustainable partnerships that will unlock Nigeria's true economic potential.' Another high point of the forum was the panel discussion 'Repricing Nigeria: Assessing the Scope for Sustained Change.' Moderated by Gavin Serkin of New Markets Media & Intelligence, the star-studded panel featured Joyce Chang of JPMorgan Chase, Jason Rekate of Citi, Razia Khan of Standard Chartered, and Ahmad Zuaiter of Jadara Capital Partners. These financial luminaries unanimously highlighted Nigeria's remarkable resurgence, pointing to its strengthened fundamentals, enhanced governance frameworks, and crystal-clear policy direction as magnets for renewed international investment. The forum further demonstrated Nigeria's global reach through the participation of distinguished diaspora members Mr. Robert Agbede, Prof. Melvin Ayogu, and Dr. Aloysius Ordu, representing the CBN Board and Monetary Policy Committee. Their presence underscored Cardoso's commitment to harnessing its global talent network. Temi Popoola, NGX's Group CEO, moderated an engaging Q&A session, while Dr. Olubukola Akinniyi Akinwunmi, Director of Banking Supervision, delivered powerful closing remarks that reinforced the CBN's transformation narrative. This landmark gathering transcended typical investment forums by creating an authentic dialogue between Nigeria's financial leadership and the global investment community, including global investors, influential Nigerian diaspora and corporate leaders. Through transparent assessment of progress and candid exploration of future challenges, it laid the groundwork for enduring partnerships and substantial long-term capital flows. At its heart stood a singular mission: to reestablish the CBN as a beacon of credibility and excellence, both globally respected and locally trusted, powering Nigeria's ascent in the world economy. Copyright © 2022 Nigerian Tribune Provided by SyndiGate Media Inc. (
Zawya
21-04-2025
- Business
- Zawya
CBN: Aligning banks' recapitalisation with monetary, fiscal policies, FG's economic vision
In this piece, JOSEPH INOKOTONG reports how the Central Bank of Nigeria (CBN's) banks' recapitalization aligns monetary, fiscal policies with the Federal Government's vision of prosperity for the people, businesses and the economy. The Central Bank of Nigeria (CBN's) decision to embark on the recapitalisation of banks was to align monetary, fiscal policies with the Federal Government's vision of prosperity for the people, businesses, and economy. The exercise, which is far underway, is recording significant successes, with successful capital raising by many banks and a surge in credit expansion to the domestic economy. CBN Governor, Olayemi Cardoso, explained that with stronger capital bases, banks can provide more loans to businesses and support the government's quest for a $1 trillion economy. Building bigger and stronger banks comes with great benefits to the banks, their customers, and the wider economy. For a government that wants to grow its economy to the $1 trillion mark, the support of the financial services sector led by the Central Bank of Nigeria (CBN) Governor, Olayemi Cardoso, is crucial. The CBN Governor had explained that bank recapitalisation ensures that lenders are well-capitalised, enabling them to take on greater risks, particularly in underserved markets. With stronger capital bases, banks can provide more loans and financial products to Micro Small and Medium Enterprises (MSMEs), rural communities, and other vulnerable segments that have previously struggled to access formal financial services. The CBN had on March 28, 2024, announced a two-year bank recapitalisation exercise which commenced on April 1, 2024, and is expected to end on March 31, 2026. The recapitalisation plan requires a minimum capital of N500 billion, N200 billion, and N50 billion for Commercial Banks with International, National, and Regional licenses, respectively. Others included merchant banks N50 billion; non-interest banks with national licence N20 billion, and non-interest banks with regional license will now have N10 billion minimum capital. The 24-month timeline for compliance ends on March 31, 2026. Cardoso said the recapitalisation policy not only strengthens financial stability but also serves as a catalyst for inclusive growth. 'By enabling banks to extend more credit to MSMEs, we enhance job creation and productivity. Furthermore, with increased capital, banks can invest in technology and innovation, crucial for driving digital financial services such as mobile money and agent banking. These technologies are keys to breaking down geographic and economic barriers, bringing financial services to even the most remote areas,' he stated. He said Nigeria has what it takes to deepen financial inclusion and support the growth of business and economy, stressing that the recapitalization exercise would also support the government's efforts to achieve a $1 trillion economy. The CBN further underscored the importance of banking recapitalisation as a major catalyst for the achievement of the $1 trillion economy agenda of the government. Banking sector remains robust Cardoso explained that the banking sector remains robust, with key indicators reflecting a resilient system. 'The non-performing loan ratio remains within the prudential benchmark of five percent, showcasing strong credit risk management. The banking sector liquidity ratio comfortably exceeds the regulatory floor of 30 percent, a level that ensures banks are maintaining adequate cash flow to meet the needs of customers and their operations. The recent stress test also reaffirmed the continued strength of our banking system. 'I am pleased to note that a significant number of banks have raised the required capital through rights issues and public offerings well ahead of the 2026 deadline. I believe that the banking sector is in a strong position to support Nigeria's economic recovery by enabling access to credit for MSMEs and supporting investment in critical sectors of our economy,' he said. Deputy Governor, Corporate Services, Central Bank of Nigeria (CBN), Ms. Emem Usoro, said the journey to a $1 trillion economy requires structured planning, clearly defined policies, unwavering implementation, and an inclusive approach that aligns public and private sector interests. In her Keynote address in Abuja at a seminar organised by the CBN for business editors and financial correspondents, Usoro said that one of the key components of the $1 trillion ambition is the recapitalisation of Nigerian banks. She noted that banks must be sufficiently capitalised to meet the financial demands of a larger and more dynamic economy. 'As we work towards building a $1 trillion economy, we must consider the recapitalisation of our banks to be able to fund, finance, and power the economy, and to favourably compete globally,' Usoro said. She further called for a collective effort from all stakeholders, adding that the financial system must be prepared to play its role in powering development. 'We should particularly pay significant attention to bank recapitalisation to ensure that our banks are strong, resilient and stable enough to carry out financial intermediation, and the much-needed financing of development projects and programmes,' Usoro said. Supporting her position, Dr. Olubuka Akinwumi, Director of the Banking Supervision Department at the CBN, provided insights into the state of the banking sector. He disclosed that banks have so far remained within the prudential thresholds stipulated by the regulator, including benchmarks for the capital adequacy ratio and non-performing loans. 'As we speak, all our banks are still within the prudential thresholds that were set. And they are actively pursuing various recapitalisation efforts,' Akinwunmi said. On the possibility of mergers and acquisitions, Akinwumi said such developments may occur naturally as banks assess their positions and seek strategic alignments. 'Banks are currently focused on raising their capital, but engagements are ongoing, and when the opportunities arise, they will be taken,' Akinwunmi added. Regarding the licensing of new banks, he confirmed a recent uptick in applications and approvals, noting that the apex bank continues to monitor and support institutions that align with national development goals. He said priority sectors such as agriculture, infrastructure, and manufacturing are receiving attention from both the government and financial institutions, as they are key to achieving a trillion-dollar economy. 'If you look at this year's national budget, it reflects a clear emphasis on critical sectors like health, education, infrastructure, and agriculture. Banks are taking cues from these priorities, recognizing them as viable areas for business expansion,' Akinwumi said. Responding to questions on how many internationally active banks had met the new N500 billion capital requirement, he noted that substantial progress has already been made. 'We are halfway through the journey in terms of timeline, and capital already raised; we are also at least halfway through. That is a positive signal,' he said. He added that starting the recapitalisation process early has helped insulate the financial system from emerging global and domestic shocks. 'The emerging global economic shifts and pressures were not lost on the management of the CBN. We started early. If we had waited till now, the challenges would have been greater. But we acted in time,' he remarked. Dr. Akinwumi expressed confidence that the recapitalisation requirements will be met, stressing that existing shareholders' funds continue to serve as a buffer. However, the CBN deliberately opted for fresh capital inflows, particularly from foreign investors who have shown renewed confidence in Nigeria's financial system. 'International perception of Nigeria's banking sector is improving. The reforms over the past year, especially around the foreign exchange regime and improved transparency regarding reserves, have boosted investor confidence,' he said. He cited recent disclosures on Nigeria's net reserves and improvements in regulatory credibility as key factors that are reshaping the outlook for foreign direct investment in the banking sector On the Loan to Deposit Ratio (LDR), Akinwumi explained that the current 50 percent benchmark does not reflect a reluctance to lend but rather a contextual response to inflation and other macroeconomic challenges. 'As the macroeconomic environment stabilizes, banks will naturally increase lending. It's a cautious approach to ensure that lending supports sustainable growth,' he said. He also touched on the Cash Reserve Ratio (CRR), stating that there has been marked improvement in transparency. Banks now have a clearer understanding of CRR computations, unlike in the past, which enhances predictability and compliance. Addressing Small and Medium Enterprises (SMEs) funding, he confirmed that banks continue to make provisions, but the CBN remains actively engaged to ensure proper disbursement and sectoral targeting. Supervisory oversight, he explained, is being deployed to verify compliance and effectiveness of disbursed funds. On incentives, he said the most powerful incentive for banks lies in the opportunities provided by a growing economy. 'A stronger bank can take on big-ticket businesses, including infrastructure financing. The current reforms, such as the infrastructure concessioning plans, present viable business opportunities for well-capitalized banks,' Akinwumi explained. The capital verification process, according to him, is thorough and designed to ensure that only legitimate, unborrowed funds are used for recapitalisation. An industry-wide tracking mechanism has been established to streamline verification across institutions and enhance collaboration. 'Our examiners follow each capital trail meticulously, moving from one bank to another as necessary. Even if it's not your bank under verification at that moment, we expect full cooperation to trace the sources of capital,' he said. On the broader question of resilience to global shocks, he maintained that Nigerian banks are being positioned to remain attractive to investors and capable of withstanding external disruptions. 'CBN is monitoring developments closely and adjusting where necessary. The recapitalisation process is not just about compliance, it's about long-term stability, competitiveness, and economic transformation,' he said. The Group Managing Director of United Bank for Africa (UBA), Mr. Oliver Alawuba, described the CBN's ongoing bank recapitalisation policy as both timely and essential in positioning the financial system to meet the demands of a growing and globally competitive economy. According to Alawuba, the initiative is expected to boost the resilience of the banking sector by strengthening its capacity to withstand economic shocks such as inflation, currency volatility, and global geopolitical disruptions. He noted that the policy will also place Nigerian banks on a stronger footing to finance the country's long-term economic transformation, including funding of large-scale infrastructure and industrial projects. Alawuba stressed that the recapitalisation policy goes beyond regulatory compliance, but is a forward-looking strategy aimed at equipping Nigerian banks to operate at the scale and sophistication required by a trillion-dollar economy. He said the move would enhance the sector's ability to support both traditional economic drivers, such as oil and gas, agriculture, and manufacturing, as well as emerging sectors like fintech, green energy, and infrastructure development. 'Nigerian banks need adequate capital buffers to meet the evolving demands of these sectors. Without this, the industry cannot effectively rise to the challenge,' he said. Alawuba pointed out the sharp contrast between Nigerian banks and their counterparts in more advanced economies, where bank assets typically range from 70 to 150 percent of Gross Domestic Product (GDP). In Nigeria, bank assets accounted for just 11.97 percent of GDP as of 2024, a gap he said must be addressed if the country's financial system is to align with international standards. He commended the CBN's recent directive mandating a significant increase in minimum capital thresholds, describing it as recognition of the urgent need for stronger financial institutions capable of delivering on national priorities such as infrastructure expansion, digital transformation, inclusive financial services, and economic diversification. Alawuba reiterated that a robust, well-capitalised banking sector is critical for Nigeria's aspiration to become a one trillion-dollar economy, and the recapitalisation drive is a step in the right direction to achieve that goal.
