Senate warns against using laundered funds for banks’ recapalisation
By Chukwuma Umeorah
The Senate Committee on Capital Market and Institutions has cautioned against the potential risks of utilising laundered funds for the recapitalisation of banks.
The Chairman of the Committee, Senator Osita Izunazo, said during the second quarter symposium organised by the Association of Capital Market Academics of Nigeria (ACMAN), urged the Central Bank of Nigeria (CBN) to intensify efforts in ensuring that only legitimate sources of capital are used in the process.
According to him, “The recapitalisation programme comes with unique risks especially when banks opt for the private placement route. The CBN should intensify efforts to ensure that laundered funds are not used to recapitalise the banks and that only fit and proper persons end up as significant shareholders, underscoring the importance of maintaining the integrity of the banking system.”
Izunazo stressed that such risks are mitigated when banks opt for capital raising through the stock market, which provides an additional layer of scrutiny in addition to that being carried out by the CBN.
The senator expressed confidence in the resilience of the Nigerian capital market to meet the funding needs of banks undergoing recapitalisation.
He said, “I am convinced that the Nigerian capital market has the depth to meet the funding needs of all the banks that will eventually approach the market for fresh capital during the two-year period of the recapitalisation programme.”
Izunazo further highlighted the nexus between the money and capital markets, emphasising the potential positive impact of a successful recapitalisation program on the broader financial landscape.
On his part, the President of Council of the Chartered Institute of Bankers of Nigeria (CIBN), Ken Opara, lauded the objective of the CBN to enhance the banking industry’s resilience and rebuild an economy grappling with high inflation and currency instability.
He said: “The apex bank estimates that the recapitalisation process will support achieving a $1 trillion economy by 2030.” Opara said that past recapitalisation exercises had significant impact including the increase in total bank lending and the reduction of non-performing loans (NPLs) to total loans ratio and in stabilizing financial systems during crises.
However, he noted that Nigeria’s current recapitalisation initiative is not the outcome of a financial crisis, but “It represents a proactive step primarily to address changing market reality and ensure that the capital base of banks comply with international standards.”
Further highlighting the benefits, The President of Nigerian Economic Society, Adeola Adenikinju saud that beyond increasing their capital base, the recapitalization exercise would increase the value these banks deliver to its shareholders.
According to him, “The increase in capital base leads to an increase in the banks’ equity prices therefore making shareholders richer as it increases their wealth portfolios.”
