Economist explains why recapitalisation of banks is imperative

An economist, Dr Ifediora Amobi says recapitalisation of banks has become imperative in order to strengthen the banking sector to tackle challenges of critical national infrastructure.

Amobi, a former Senior Special Assistant to the President on National Development Matters, said this in an interview with newsmen on Tuesday in Enugu.

Central Bank of Nigeria (CBN) Governor, Godwin Emefiele had at a briefing in June said banks would be recapitalised in order for them to have strong capital base.

The CBN governor said recapitalisation of the banks was long overdue as it was last done in 2004 by Prof. Charles Soludo, the then governor of the apex bank.

According to Amobi, most of the banks in the country are presently weak and cannot finance critical infrastructure projects that require long term loan credit facilities.

“It is always helpful to the economy when banks and other businesses are highly or heavily capitalised or re-capitalised.

“What it means is that you have a stronger leverage to actually go into bigger transactions.

“If you recall the banks recapitalisation of 2006/2007 by Prof. Chukwuma Soludo, then CBN Governor helped our banking sector. Then, the banks recapitalised to a tune of N25 billion.

“So, if you rank the first 100 banks in Africa, banks in Nigeria are not even up to the first 20 banks on the continent.

“We have banks in Egypt and even Mozambique that are bigger than our big four banks,’’ Amobi, the Executive Secretary of Anambra State Investment Promotion and Protection Agency (ANSIPPA) said.

According to him, when you are now looking at capital projects, national infrastructure projects like power, roads, you need banks that can actually give you that heavy capital.

“It is imperative that we raise the standard of Nigerian banks capital-wise to be able to play their role within the critical infrastructure projects space.

“In the absence of heavy capitalisation of our banks, they will only continue with their Form M shipping and import-export businesses,’’ Amobi, who is the immediate past Executive Director of African Heritage Institution (Afri-Heritage) noted.

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