From Adanna Nnamani, Abuja
In 2023, when President Bola Tinubu first revealed his ambitious vision to guide Nigeria toward a $1 trillion economy by 2030, the prospect seemed uncertain, especially considering the fragile state of the economy he inherited. The nation’s financial landscape was marked by mounting challenges, including inflation, a weakening currency and slow growth.
Yet, undeterred by these obstacles, the executive branch, under his leadership, has remained resolute in its mission.
By strategically implementing targeted fiscal policy initiatives and aligning them with the monetary policies of the Central Bank of Nigeria (CBN), the government is steadfast in its commitment to achieving this transformative goal.
In fact, President Tinubu brought down the period of the attainment of the ambitious target while speaking at the 29th edition of the annual Economic Summit, when he reiterated; “distinguished ladies and gentlemen, a $1 trillion economy is possible by the year 2026 and a $3 trillion economy is possible within this decade. We can do it.”
At the centre of measures towards the achievement of this target lies in the implementation of sound monetary policy measures of the Central Bank of Nigeria (CBN) through the Deposit Money Banks (DMBs) which deploy funding to productive ventures for sustainable economic development and growth. Along this line of thinking, President Tinubu directed the creation of a new single-digit interest-rate Fund to provide N75 billion to support manufacturing enterprises, among other targeted financing interventions.
While speaking late last year in Lagos, at a forum with the theme: “Nigeria’s Journey Towards a $1 trillion Economy: Impact of Banks’ Re-capitalisation, Opportunities for Fintechs and Real Sector” Isa Omagu, the Divisional Head of Services, Bank of Industry (BoI), harped on the need for synergising the fiscal and monetary policies to enhance productive capacity of the country to shield it from being import dependent.
Also, Mr. Bello Hassan, the Managing Director and Chief Executive Officer of the Nigeria Deposit Insurance Corporation, reiterated the indispensable role of banks in activating and sustaining productive capacities of every nation, and reasoned that recapitalising the nation’s banks is expedient to enhancing resilience, solvency and capacity of Nigerian banks to absorb shocks and continue to support the economic development of the country.
Against this background, most banks have stepped up their recapitalising drive to enable them to deploy funding to productive and development initiatives aimed at attaining a $1 trillion economic growth by 2030.
The last banking recapitalisation was carried out by the then CBN Governor, Prof. Chukwuma Soludo between 2004-2005, raising the capital base requirement of each bank from N2 billion to a minimum of N25 billion. The outcome of the implementation stimulated financial stability, economic growth and shielded the nation from the 2008-2009 worldwide economic recession.
Since then, Nigerian banks have become more involved in the economy by lending to critical sectors on a more sustainable basis. On a good number of occasions, not a few Nigerian banks have gone to the capital market, on their own, to raise additional capital in support of their businesses.
Years down the line, and buoyed by the manifest impact of the previous capital injection exercises on the financial health of the banks and subsequent economic growth, the CBN Governor, Olayemi Cardoso, in March 2024, rolled out a comprehensive two-year (April 1, 2024- March 31, 2026) banking recapitalisation programme for Nigerian banks.
Under the on-going initiative, titled, “review of minimum capital requirements for commercial, Merchant and Non-Interest Banks in Nigeria”, commercial banks with international coverage will require N500bn, while commercial banks with national and regional coverage will require N200bn and N50bn respectively. Merchant banks will require N50bn to play at national level whereas Non- Interest banks will require N20bn for national coverage, and N10bn for regional operations.
One unique condition, attached to the capital raising, according to the CBN circular announcing the commencement of the programme, is that “ the minimum capital specified above shall comprise paid-up capital and share premium only, and shall not be based on shareholders’ fund”
The apex bank, in the circular advised banks to opt for any of the following: “private placements, Rights Issue and or offer for subscription, Mergers and Acquisitions and or upgrade or downgrade of license authorisation”.
With the CBN’s mandate, many banks have begun the implementation of the funds- raising in phases with many of them completing the first tranche of their fund raising. They Many banks have submitted their proceeds to the regulators – CBN as well as to the Securities and Exchange Commission (SEC) for verification and approval. Already, five banks are cited to have raised a total of about N1.185trillion from equities market in the first phase. The banks include: GTCo (N209.41billion), Access Holdings (N351billion), Zenith Bank (N350.46billion), Fidelity Bank (N127.1billion), and FCMB Group (N147. 5billion). (Note: these figures may change depending on what was approved by the regulators)
According to close watchers of the recapitalisation exercise, the outcome, thus far, has been positive. It is expected that interest in the exercise will increase, exponentially, between now and the end of 2025 as the countdown to the April 2026 deadline approaches. The quantum of investment that is being driven by the banks through the exercise can better be appreciated when considered against the number of banks that are participating.
According to figures as at April 26 2024, there are 36 commercial, Merchant and Non-Interest Banks with either international, national or regional authorizations; including Heritage Bank which was later liquidated by the CBN. A breakdown of the existing entities indicates that the nation currently have seven commercial banks with international authorisation, 14 commercial banks with national authorisation, four commercial banks with regional authorisation, four Non-Interest Banks with national authorisation and six Merchant banks with national authorisation. The number is expected to rise given that there are so many applications for banking licenses that are awaiting approval of the CBN.
Although the appetite for foreign investment in Nigeria, in the last couple of years, has remained relatively low; due largely to unfavourable business climate, Nigerian banks have retained the market confidence, and are leading investments towards the attainment of the projected $1trillion economy by 2030.
Also weighing in on the banking reforms, the Chief Executive Officer of Barntrends Services Limited, Mr Barnabas Eke, noted that the road ahead is undoubtedly challenging, but noted that the incumbent administration’s determination to revitalise the economy and accelerate growth signals a forward-thinking approach aimed at positioning Nigeria as a leading global economic player.
“It is believed that the sustained interest of investors in the financial services industry, particularly, the banks, is not only a proof of confidence in the banks but also a strong indication of high prospects of return on investment (ROI) in the sector,” he said.