New Telegraph

CBN tightens noose further as banks begin recapitalisation processes

The Central Bank of Nigeria (CBN) has set up internal sur- veillance and monitoring mechanisms to ensure that recapitalisation implementation strategies submitted by banks are followed strictly, ensuring that funds coming in are from legitimate sources, Saturday Telegraph has gathered. Besides the exclusion of the retained earnings from computation of capitalisation positions, the apex bank is said to have insisted that despite huge profits declared by banks, restrictions on higher dividends to shareholders is enforced. For instance, the leading tier 1 banks, FirstBank, UBA, GTBank, Access and Zenith (FUGAZ) that made superlative profits this year and with brighter prospects, would have em- barked on huge dividend payout to Shareholders, who would have in turn used it to subscribe to eights issues being adopt- ed by most banks. ”

There are strict rules guiding the share of profit that a bank can pay out as dividend. Last September, the CBN put out a circular that barred deposit money banks from using any part of revaluation gains to pay dividends. Even be- yond this example, there has always been some restrictions from the CBN guiding banks’ dividend policy. These laws factored in CAR, NPL, Capital Conservative Buffers (CCB), and level of forbearance support from the CBN. In other words, banks cannot make aggressive dividend payments in hopes of investors using payouts to reinvest and inject capital to meet the new capitalization requirements,” according to Damilare Asimiyu Macroeconomic Strategist, Afrinvest Consulting Limited, in a mailed response to Saturday Telegraph inquiry.

John Agbo, chartered stockbroker posited that the new leadership of CBN may have been piqued by some of the negative fall-outs from the 2004/5 consolidation that he alleged was marred by injection of funds from unverified sources or laying claims to existence of funds in the coffers of the banks when in actual sense, they were only paper presentation’s to the apex bank. “I think CBN, this time around, is ready and willing to ensure that only legitimate funds come into the country and into the banks,” Agbo said.

Going further, he said, Guaranty Trust Holding Company (GTCO), recent- ly announced the largest pre-tax profit of N509.3 billion, more than six times the profits it made in the same period in 2023. The N509 billion profit is more than the N361 billion the bank needs to raise to meet the central bank’s recapitalisation requirement. Also, reports showed that GTCO’s retained earnings is N931 billion up from N737.5 billion a year earlier. But, the new CBN rules forbid it from being captured that as part of its share capital.

Read Previous

Analysts List Pathways to Naira’s Fair Value, Inflation Management

Read Next

Finally, Oyo Govt Opens Olodo Bridge To Vehicular Movement