The Chief Executive Officer (CEO) of the Nigerian Stock Exchange (NSE), Oscar Onyema, has disclosed that The Exchange will dialogue with the Central Bank of Nigeria (CBN), in the implementation of a fresh recapitalisation for banks.
Onyema stated this at the recently-held Rand Merchant Bank (RMB) Nigeria Economic and Business Conference in Lagos.
As capital base in the banking sector continues to weaken, Onyema said the full picture of the recapitalisation plan is, at the moment, unclear to the Nigerian Stock Exchange.
Defending why the NSE is very much concerned about banks’ recapitalisation in the country, Onyema stressed that the last banking sector recapitalisation in 2005, raised the sophistication and liquidity of the Nigerian capital market.
“We are still studying the pronouncement that was made last week; we are not quite sure what it means, but what I can say is that historically if you look at the last big recapitalization efforts for the banking sector, the capital market was greatly used for raising the financing and indeed it was very beneficial to the capital market to the extent that the market became more sophisticated and a lot more players came into the market from the investors perspective.
“Till today, the financial sector is still one of the most liquid sectors listed on the stock exchange. So, we know that potentially, it could be very beneficial to the capital market.”
Prior to this, Governor Godwin Emefiele of the Central Bank of Nigeria had announced the apex bank’s intention to recapitalise commercial banks in the country.
The CBN boss said the move is aimed at repositioning Nigerian banks in order that they may be among the top 500 banks in the world. The plan is also aimed at reducing the risks and the possible impact of any economic crises that may befall the financial sector.
Why is this important? The move by the apex bank is largely due to the need to mitigate the crises in the financial sector, as well as improve the current state of commercial banks’ capital base of N25 billion which has substantially weakened.
To better understand the situation, take into consideration the recent merger/acquisition of Diamond Bank Plc by Access Bank Plc in 2018 which became necessary mainly due to the financial crises that befell the former lender.
Furthermore, the take-over of Skye Bank Plc by the Asset Management Company of Nigeria (AMCON) in 2018, coupled with other deficiencies in capital adequacy and liquidity requirements in the sector, really give credence as to why it has become important to recapitalise the sector.