•Calls for minimum disruption in sector
Dike Onwuamaeze
The Centre for the Protection of Private Enterprise (CPPE) has described the move to recapitalise the country’s banking institution as one in the right direction and called for minimum disruption of the banking system in the implementation of the proposed new minimum capital requirements for banks.
The call was made yesterday, by an Economist and Chief Executive Officer of CPPE, Dr. Muda Yusuf, in a statement titled: “Implications of the Proposed Recapitalisation of Nigerian Banks.”
Yusuf, noted that, “The proposed recapitalisation of banks should be done in a manner that would minimise shocks and disruptions to the banking system and the economy at large.
“We commend the CBN for giving a timeline of 24 months for banks to comply. This would minimise disruptions and dislocations in the financial system.
“It would also ensure a smooth transition to the new capitalisation regime for banks.”
He added: “With the current approach and timeline given by the CBN, the risk of banks collapse or hasty mergers and acquisitions should be minimised.
“It is also laudable that the current categorisation of banks with differential capital requirements has been maintained – international, national and regional.
“This is necessary to allow for inclusion and reduce the risk of dominance of the banking space by a few big banks.”
He also stated that it was imperative for the CBN to assure depositors of the safety of their funds in the banking system, irrespective of the current level of capitalisations of banks.
“It is important to sustain the confidence of the banking public about the soundness and stability of the Nigerian banking system, especially because of the perception and vulnerable risks of smaller banks,” Yusuf said.
According to him, the apex bank should caution all players in the banking sector against predatory and other anti-competitive practices in the industry on account of the recapitalisation policy.
He also implored the CBN to ensure minimum risk to shareholders and employees in the banking system and guide against elevated concentration of risks and the deepening of oligopolistic structure in the banking system.
Yusuf, however, expressed concerns around the large interest rate spreads in the Nigeria banking system between deposits and lending rates, which are sometimes as high as 20 per cent that which is one of the highest globally.
According to him, “the tenure of funds in the banking system is extremely short. Over 80 per cent of funds are of one-year tenure or less, which explained the high level of assets and liability tenure mismatch in the banking system.
“Access to credit by small businesses remains a major inhibition to economic growth and economic inclusion. Small businesses account for over 50 per cent of GDP, but get less than 5.0 per cent of credit in the banking system,” he said.
Yusuf, pointed out that the financing gap in the Nigeria SME space is about $32.2 billion (over N40 trillion), according to IFC estimates.
He, therefore, argued that de-risking the credit space for small businesses should be accorded high priority in the new dispensation.
“This is essential to boost growth, create jobs and deepen economic inclusion,” Yusuf said.
