From Ndubuisi Orji, Abuja
The Governor, Central Bank of Nigeria (CBN), Mr Yemi Cardoso, has stated that the ongoing recapitalisation of commercial banks in the country is expected to support the Federal Government’s goal to grow the economy to $1 trillion by 2030.
Cardoso made this remark yesterday when he appeared before the House of Representatives Committee on Banking Regulations.
The CBN was invited to brief lawmakers on policy measures and strategies to address domestic macroeconomic challenges in the country.
He explained that bank recapitalisation is expected to foster a more robust and resilient banking sector by March 2026. The CBN Governor, speaking on banking supervision, explained that “one of the key measures includes the recapitalization of the banking sector by raising the minimum capital base to support the $1 trillion economy envisioned by the Federal Government of Nigeria (FGN) by 2030.”
“Banks are required to meet these new thresholds by March 31, 2026, with several options available for reaching these targets.
“These options include issuing new equities, engaging in mergers and acquisitions, or adjusting their operational licenses. The Bank also revoked the license of Heritage Bank, facilitated the successful merger of Unity Bank and Providus Bank, revised Cybersecurity Rules for Banks and PSPs, suspended processing fees on cash deposits, and enhanced AML/CFT supervision, among others.”
Cardoso added, “In the foreign exchange market, we have achieved increased transparency and improved overall supply. By allowing the foreign exchange rate to be determined by market demand and supply, the CBN has reduced arbitrage and speculative activities, and eliminated the front-loading of FX demand.
“These policy measures have effectively narrowed the exchange rate disparities between the NAFEM and BDC segments, which have largely led to the convergence of FX rates. Improved transparency in the market has restored market confidence, leading to increased capital inflows, which enabled the CBN to clear existing FX backlogs.
“The settlement of all legitimate backlogs of outstanding FX obligations by the Bank has significantly improved Nigeria’s credibility and ratings across the global financial market, helping to boost investor confidence and enhance liquidity in the foreign exchange market.
“With improved investor confidence, foreign investments have increased as evidenced by a significant rise in capital importation by 65.56% to $6.49 billion between January and July 2024, compared to US$3.92 billion in the corresponding period of 2023.
“Collectively, these actions have contributed significantly to the stability of the financial system. While inflation remains a major concern, we are not relenting in ensuring that requisite measures are taken.
“Headline inflation slightly increased from 32.15% in August to 32.70% in September 2024. The MPC further tightened the policy rate in its September meeting in anticipation of an uptick in inflation due to the upward adjustment of the petroleum pump price.
“On a positive note, there was a moderation in core inflation from 27.58% to 27.43% over the same period. We, therefore, expect the year to end with significant moderation in inflation, as our policy measures permeate the real economy.”
Furthermore, the CBN boss noted that in a bid to control inflation, the apex bank has introduced comprehensive monetary policy measures. This, according to him, includes increasing Cash Reserve Ratios and normalizing Open Market Operations as the primary liquidity management tool.
“In addition, we have adopted an Inflation-Targeting (IT) monetary policy framework as part of the Bank’s Enterprise Strategy (2024-2028). The IT framework, widely adopted across various global economies, is renowned for its effectiveness in combating persistent inflation.
“These integrated measures are aimed at stabilizing prices, optimizing liquidity management, and engendering an effective monetary policy framework.
“Regarding the foreign exchange market, the Bank implemented various reforms, including a unification strategy, which streamlined various exchange rate windows into a single model, adopting the ‘Willing Buyer, Willing Seller’ approach to enhance FX liquidity and financial market stability.
“This move was aimed at fostering transparency, reducing market distortions, and enhancing the efficiency of foreign exchange allocations,” Cardoso stated.
He added, “This consolidation involved the implementation of new operational guidelines, which included removing the International Money Transfer Operators (IMTOS) quote cap.
“Additionally, the Bank resumed the sales of FX at the NAFEM and Bureau De Change (BDC) segments, bolstered by an improved supply from Foreign Portfolio Investors (FPIs).”