Don’t Allow Stolen Funds To Be Used For Banks Recapitalization, Senate Committee Chairman Tells CBN

The Chairman Senate Committee on Capital Market & Institutions, Osita Izunaso, has called on the Central Bank of Nigeria to double efforts to ensure that stolen funds are not used to recapitalise banks.

The lawmaker said this at the 2nd Quarter Symposium organized by the Association of Capital Market Academics of Nigeria.

Izunaso made the call as Nigerian banks jostle to raise their capital requirement to N500bn for international, N200bn for national, and regional banks to maintain a minimum share capital of N50bn.

The apex bank excluded reserves and retained earnings from the capital requirement saying that the reason for the exclusion of retained earnings is for banks to inject fresh capital into the system.

Izunaso said, “It is important to point out that a recapitalisation programme comes with unique risks especially when banks opt for the private placement route. The CBN should intensify efforts to ensure that laundered funds are not used to recapitalize the banks and that only fit and proper persons end up as significant shareholders. This risk is minimized when banks go through the stock market which offers a screening layer in addition to that carried out by the CBN.

“I am convinced that the Nigerian capital market has the depth and breadth to meet the funding needs of all the banks that will eventually approach the market for fresh capital during the two-year period of the recapitalization programme.

“In view of the strong link between the money and capital markets in Nigeria with most banks quoted on the Nigerian Exchange, I am confident that the successful implementation of the recapitalization programme will have salutary impact on the capital market.”

The exercise which began April 1, 2024 will end by 2024 and banks like Zenith Bank Plc, United Bank of Africa, First Bank of Nigeria Holding and Guaranty Trust Company Plc have announced a capital raise through the Nigerian Exchange Ltd.

The president of the Chartered Institute of Bankers, Dr Ken Opara said the recapitalisation will boost liquidity in the Nigerian capital market.

He said, “As banks raise capital to meet their new equity requirements, we expect to see a rise in activities within the capital market. This would likely increase total market capitalization, reflecting a more vibrant and dynamic financial sector.”

The President of Nigerian Economic Society, Professor Adeola Adenikinju, said the exercise will deepen the capital market as well as increase the value of the naira.

Adenikinju said, “As foreign investment is attracted into the economy with the 2024 recapitalisation, the demand for the naira increases; hence, the value of the naira is expected to appreciate.

“To meet the minimum paid-up capital, the banks could raise funds on the Nigerian Stock Exchange. This is expected to increase the volume of activities in the market as well as the stock market capitalisation.”