By Our Reporter
Olayemi Cardoso, governor of the Central Bank of Nigeria (CBN), attributes the influx of foreign investments into the country to the ongoing bank recapitalisation programme introduced by the apex bank.
Speaking at an event in Abuja on Wednesday, Cardoso noted that the increase in foreign direct investments is evident in the country’s rising foreign exchange earnings. Represented by John Simeon Onoja, acting director of Financial Policy and Regulations, Cardoso explained that the capitalisation programme aims to provide banks with the liquidity needed to lend more to relevant sectors.
“The impact of the capitalisation programme is clear. It will increase the lending capacity of the banks because enhanced liquidity empowers them to lend more to relevant sectors. We are already seeing increases in foreign direct investments, which banks can confirm, and these investments are positively impacting the liquidity situation in the forex market,” he said.
To meet the recapitalisation requirements, some banks have begun issuing ordinary shares, public offers, rights issues, private placements, mergers, and acquisitions. Those unable to meet the current capital category are allowed to downgrade.
Foreign investments into the country rose to $3.38 billion in the first quarter (Q1) of 2024, up from $1.09 billion reported in the previous quarter, according to the National Bureau of Statistics (NBS). Portfolio investment led the way with $2.08 billion, accounting for 61.5 percent of the total investment.
Cardoso also mentioned that a national bank can downgrade to a regional bank and still serve the Nigerian people effectively. “The Central Bank of Nigeria conducts stress tests to check how financial institutions react to various economic shocks. Decisions are then made to ensure financial institutions can survive these shocks,” he said.
Efforts are ongoing to enforce proper purchasing criteria for new shareholders to prevent illicit funds from entering the system. Cardoso added, “The equity market is already being boosted, and this activity will significantly increase tendencies and further activities in the capital market.”
In March 2024, the CBN announced new minimum capital requirements for banks, setting the minimum capital base for commercial banks with international authorization at N500 billion