CBN Plans Fresh Banks’ Recapitalisation As Capital Base Weakens By $3.5bn

The depreciation of the naira between 2004 when the last banking sector recapitalisation took place and now has cut the value of the capital of each Deposit Money Bank by about $175m.

The recapitalisation of the banking sector, which was done in 2005, required the banks to raise their capital base from N2bn to N25bn.

The exercise then saw the emergence of 24 Deposit Money Banks following the merger of some of them as well as the acquisition of many that could not raise the required capital.

Speaking on Monday in Abuja during the unveiling of his economic agenda for the next five years, the CBN Governor, Mr Godwin Emefiele, noted that the drop in the value of the naira to the dollar had weakened the capital of banks.

For instance, the apex bank boss recalled that in 2004 when the banks were last asked to recapitalise, the value of a dollar to the naira was about N100.

This, he explained, meant that the N25bn capital base of banks when translated into the dollar was about $250m.

However, due to the drop in the value of the nation’s currency which now exchanges for N360 to a dollar, the governor put the translated value of N25bn at just about $75m.

Going by this, it, therefore, means that the value of the capital of each bank had been reduced by $175m.

Based on the number of Deposit Money Banks in the country which stands at 20, the total value of the capital base may have been eroded by about $3.5bn.

Emefiele said going by the huge developmental role the apex bank would want the banks to play in the next five years, it had become imperative to demand their recapitalisation.

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