Uwaleke urges CBN to adopt incentives in banking sector recapitalisation

President of the Capital Market Academics of Nigeria, Prof. Uche Uwaleke has called on the Central Bank of Nigeria (CBN) to adopt incentives rather than coercion policy in the banking sector recapitalisation.

The governor, CBN, Mr. Olayemi Cardoso at the banking community at the 58th annual Bankers’ Dinner and 60th Anniversary of the Chartered Institute of Bankers of Nigeria (CIBN) in Lagos on Friday disclosed that Nigeria’s banks are to increase their capital base as the federal government led by President Bola Tinubu targets the $1trillion Gross Domestic Product (GDP) within the next three years.

The former Head, Department of Banking and Finance, Nasarawa State University, responding to the policy by CBN said the idea of recapitalisation of banks is a welcome one, maintaining that it goes without saying that capital is needed to finance big-ticket projects especially when the government is targeting a $1 trillion economy in a few years’ time.

“But I think the strategy should be somewhat different from the approach adopted in 2005. It should be more about incentives than coercion.

“Some Deposit Money Banks (DMBs) (especially many in the FUGAZ category) are already making efforts to increase their capital base.

“The CBN can use prudential guidelines to strengthen the present tiered arrangements. The use of the CAR (the ratio of a Bank’s capital to risk weighted assets) is a good example.

“The apex Bank can also use differential cash reserve requirements as well as preferential participation in the forex market for well-capitalised banks as some of the incentives.”

He added that, “For whatever it is worth, smaller banks playing at the regional level should not be regulated out of existence.”