Nigeria’s Foreign Investments Rising On Proposed Bank Recapitalisation
Olayemi Cardoso, governor, Central Bank of Nigeria (CBN), says that the influx of foreign investments into the country can be attributed to the ongoing bank recapitalisation programme, which was recently introduced by the apex bank.
Cardoso said this at an event in Abuja on Wednesday, noting that the increase in foreign direct investments is evident in the increased foreign exchange earnings in the country.
Cardoso, who was represented by John Simeon Onoja, acting director of Financial Policy and Regulations, explained that one of the reasons that informed the capitalisation is the understanding that banks will need liquidity to be able to lend more to relevant sectors.
“The impact of the capitalisation programme, we all know, is that it is definitely going to increase the lending capacity of the banks because liquidity definitely is going to empower them to lend more to the relevant sectors.
“Definitely, there are going to be increases in foreign investments. We are already seeing them; the foreign direct investments are already coming in. The banks can attest to that. We can see that a lot of them are bringing in a lot of forex into the economy, which is going to also affect the liquidity situation in the forex market positively,” he said.
He noted that to meet the recapitalisation requirements, some banks have begun the issuance of ordinary shares, public offers, right issues, private placements, mergers and acquisitions, noting that those who are not able to meet the current capital category are allowed to downgrade.
Foreign investments into the country rose to $3.38 billion in the first quarter (Q1) of 2024, from $1.09 billion reported in the previous quarter, according to the the National Bureau of Statistics (NBS). Portfolio investment ranked top with $2.08 billion, accounting for 61.5 percent of the investment.
Cardoso noted that a national bank can downgrade to a regional bank, and yet serve the Nigerian people well.
“This is to remind us that the Central Bank of Nigeria normally carries what we call a stress test, and it is just to check how the financial institutions will react to shocks at different levels in the economy. And we do that, and we give the results. From the results of management, decisions are taken to ensure that in the event that there are various shock levels in the economy, financial institutions will be able to survive,” he said.
Cardoso also explained that efforts are ongoing to enforce proper purchasing criteria for new shareholders to ensure illicit funds are not allowed into the system.
“The equity market is already being boosted and this activity is going to increase so much tendencies and further activities in the capital market.”
The CBN, in March 2024, announced a new minimum capital requirements for banks, pegging the minimum capital base for commercial banks with international authorisation at N500 billion.
Afrinvest’s 2024 Nigerian banking report has shown that currently, international banks: Access, First Bank, FCMB, GTCO, First Bank, Fidelity, Zenith, and UBA, have together a capital of about N1.3 trillion and would require at least N2.2 trillion to reach the new capitalisation requirements.
For the National licenced banks: Ecobank, StanbicIBTC, citibank, Keystone Bank, Standard Chartered, Sterling, Union Bank, Unity Bank, Polaris, Wema Optimus, Premium Trust bank, their gap is N1.6 trillion to get them to N2.2 trillion.
While presenting the report, Ike Chioke, chief executive, Afrinvest Group, said that the gap underscores the challenge of the anemic growth that the economy of Nigeria has suffered over the last two decades, from 2004 to 2024.
He said that the industry may soon witness merger and acquisition, as well as downgrade or upgrade of bank licences.
Chioke stressed that all other sectors of the economy must be made to grow alongside the banking sector, if the nation must achieve its $ 1 trillion economy target.
“When you want to think about growing the Nigerian economy to $1 trillion, it’s not just the banks that will need to grow. Every other aspect of the economy needs to grow alongside it.”
