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Recapitalization: Banks expected to approach stock market for additional funds – Senator

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Banks are expected to approach stock market for additional fund with the introduction of new minimum capital requirements, according to Senator Osita Izunaso, the Senate Committee Chairman on Capital Market and Institutions.

In a statement, Izunaso commended the Central Bank of Nigeria’s (CBN) initiative to implement these requirements.

He explained that the measure was critical given the depreciation of the naira, which significantly affected the capital base of banks in recent years. Highlighting the innovative approach of adopting tiered capital requirements based on a bank’s operational scale, he contrasted this with the uniform N25 billion capital base used in the 2005 banking recapitalisation.

The statement read:

He noted that the expectation is that banks, many of which are listed on the Nigerian Exchange, will utilize the stock market to raise the necessary funds through offers for subscription or rights issues. Such a move is predicted not only to bolster the financial system but also to positively influence the capital market.

Izunaso stressed the importance of injecting fresh capital to meet these requirements, rather than relying solely on revenue reserves. This strategy is poised to deepen the capital market, escalate equities market capitalization, and possibly act as a beacon for Foreign Direct Investment (FDI), with beneficial effects on the economy at large.

He said:

However, Izunaso also highlighted potential risks, particularly the danger of banks using laundered money for recapitalisation through private placements. He urged the CBN to enhance its oversight to ensure that only fit and proper individuals become significant shareholders, noting that transactions through the stock market inherently provide an extra layer of scrutiny.

Reaffirming his support, Senator Izunaso assured the CBN and stakeholders of the Senate Committee on Capital Market’s commitment to the successful execution of the recapitalisation programme, emphasizing its critical role in strengthening Nigeria’s financial landscape.

 

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