An esteemed economist, Professor Uche Uwaleke, has expressed his support for the proposed recapitalisation of banks, describing it as a positive move.
Professor Uwaleke, who serves as the President of the Association of Capital Market Academics of Nigeria, conveyed his views in an exclusive interview with the News Agency of Nigeria over the weekend.
“It is evident that substantial capital is essential for funding large-scale projects, particularly as the government aims for a one trillion dollar economy in the coming years,” he remarked.
Highlighting the potential impact, he added, “Moreover, drawing from the experience of 2005, the recapitalisation initiative is likely to inject fresh dynamism into the stock market.
“However, I believe the approach this time around should differ from that of 2005. It should be more focused on providing incentives rather than resorting to coercion.
“Several Deposit Money Banks (DMBs), particularly those within the FUGAZ category, are already taking steps to bolster their capital base,” he noted.
Emphasising the role of the Central Bank of Nigeria (CBN), he suggested that prudential guidelines could be leveraged to reinforce the existing tiered structures.
Professor Uwaleke cited the Capital Adequacy Ratio (CAR), which represents a bank’s capital in relation to its risk-weighted assets, as a pertinent example.
“Additionally, the apex bank can consider differential cash reserve requirements and preferential access to the forex market as part of the incentives for well-capitalised banks,” he proposed.
“It is paramount to ensure that smaller banks operating at the regional level are not driven out of the market by excessive regulation,” he further stressed.
Earlier, the CBN had announced its intention to initiate a fresh phase of banking recapitalisation for Deposit Money Banks, aimed at securing additional capital to facilitate their participation in the projected one trillion dollars economy by 2030.
NAN
