*Advise Cardoso To be Wary Of Pitfalls Of 2005 Recapitalisation
John Danjuma Omachonu
The Central Bank of Nigeria (CBN) Governor, Yemi Cardoso, had his first major outing last weekend, where he hinted on the new monetary policy, regulation and the general state of the Nigerian economy.
Apart from the seeming proposal for another round of recapitalisation in the banking sector, and the change in the run of the meetings of the MPC which will now be on quarterly basis, the entire speech of Cardoso, was tilted towards justifying the intervention in the affairs of the apex bank and the fact that the economy is in a bad shape, although, Nigerians have yet to be told the true state of affairs of the economy inherited by the present administration.
While stakeholders believe that the banking sector needs redirection, they argue that for the much needed financial services stability to be ensured, Cardoso must look beyond justifying the intervention and get into real business of appraising the system before taking action aimed at meeting the envisaged $1 trillion economy.
This is even as the speech has triggered faster discussions on mergers and axqusition among the banks.
For instance, they argue that while the industry needs recapitalisation, the appraisal of core competencies of the banks must be taking into cognisance.
Infact, after the news started filtering in of the possible acquisition/merger between Unity and Providus Banks, the firmer’ shareholders have been smiling at the bank as their equities have gained 89% in just over a week.
However, after Cardoso’s speech at the CIBN Dinner on Friday evening, talks of possible mergers and acquisitions have dominated the atmosphere in the Nigerian banking space.
With Unity Bank’s management facing inquiries from its shareholders over 2023’s below-par financial performance, the talks of a merger are loud, and they may get louder this week.
Similarly, some second tier banks are weighing options of resuming Merger talks, even though with comfortable capital base but if only to pool resources together for bigger rocket projects.
But, some analysts, have warned CBN to be wary of the pitfalls of the 2005 consolidation which was typified by forced mergers, lost of jobs and dislocation in the industry.
While they agreed that recapitalisation of banks has become inevitable but it must be done in such a way that the mergers and acquisitions that would hit banks won’t lead to massive job cuts.
The Founder of Centre for Promotion of Private Enterprise, Muda Yusuf suggested that the recapitalisation must be orderly and systematic, adding that a year or two should be allowed for the process and not for the apex bank to insist on a short deadline like what was done during the era of ex-President Olusegun Obasanjo.
Yusuf, who spoke on Channels Television’s Sunrise Daily programme on Monday said:
“What we had in 2005 was very unfortunate. Banks should not be stampeded,” Yusuf said, urging the CBN to give banks enough time for systemic migration.
Prof Segun Ajibola of Babcock University, Ogun State, who also featured on the program was frontal in his assessment of CBN Governor’s address, saying it fell short of many expectations.
The former Executive director of the defunct Intercontinental Bank and past President of CIBN posited that at this level, we as a country should be able to move from growth to development and as the apex bank chief, it would have been an opportunity to talk on positions of some economic indices and indicators, like happening in the foreign exchange market that has been witnessing turbulence, Bureau De change operators, balance of payments, among others.
Ajibola called for strategic consultations between stakeholders for the process to be fluid and successful, saying that the CBN should not force banks into unholy alliances.
Lagos based energy analyst, Friday Ameh said the present identified gaps and misdirection in the administration of the immediate past CBN Governor should have cut out his job areas for him, rather than embarking on rhetoric and shadow chasing.
At the CIBN Dinner last Friday, Cardoso said Nigerian banks do not have sufficient capital relative to the finance system needs in servicing a $1trn economy.
“As a first step, the Central Bank will be directing banks to increase their capital,” he announced at the 60th anniversary of CIBN in Lagos State.
The last time the CBN increased capital base for banks was in 2005 when current Anambra State Governor, Charles Soludo, was the apex bank chief. Capital base was raised from N2bn to N25bn, with more than 80 banks collapsing into about 30 in an unprecedented season of mergers and acquisitions that came with attendant job losses.