New Telegraph

Recapitalisation: Banks Grapple With CBN’s Stringent Monetary Measures

…Lenders may cut corners-Mohammed

The Central Bank of Nigeria’s (CBN) monetary policies, typified by high Monetary Policy Rate (MPR) currently at 24.75 percent, Cash Re- serve Ratio (CRR), at 45 percent, among others, may have put banks in a challenging position to meet the recapitalisation requirements, Saturday Telegraph checks have revealed.

The stakeholders are of the opinion that the anchor interest rate (MPR) is too high as it climbs to over 30 percent by the time banks add overhead cost as lending rate to customers, a development they argue is crippling the economy. Also, the CRR , they further argue, puts greater percentage of banks’ loan- able funds free of interest with CBN, at the expense of much needed credit to critical sectors of the economy.

Overall, they said the essence of intermediation that should foster financial to attract both local and international investors for seamless recapitalisation would have been lacking. Damilare Asimiyu, macroeconomic strategist, Afrinvest consulting limited said: ” The risk with high MPR is only crystalizing on banks operating capacity. With high MPR (24.75%), cost of lending by banks would be high, and this also come with the risk of higher credit default and growth in non-performing loans. As per the CRR of 45%, the concern of banks on this is that they would have reduced capital to sweat out gains from even in post capital raise period since CBN 45% deduction would come first. Finally, it would be difficult for any bank to cut corners in this capital raising period as the CBN is specific with the type of capital it wanted – share capital and share premium.”

According to Dr Hussaini Muhammed, Man- aging Director/CEO of Muregi Associates, Abuja based consulting firm of professionals “Banks already cut or cutting corners even before the new proposal by the Regulator of N500bn and N200bn respectively Kindly recall Prof Soludo’s recapitalisation period when most banks didn’t have the required capital but due to their fraudulent accounting method they came up with all sorts of figures, the same fraudulent Narratives is about to happen.”

Mukhtar Mukhtar, chairman of Trusted Share- holders Association of Nigeria (TSAN), Th e problem is not only with the rights issue adoption but wrong timing due to poor economy. The impression outside there is that some banks may have offended some polit- ical parties and now is the payback time with some of these monetary policy measures that are stifling them. The CRR, which is interest free is too high and not good for the economy. It may be targeted at some banks to deal with them. But at the end of the day, it’s the economy that will suffer without stable bank- ing industry.”

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