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Black market dollar to naira exchange rate today 26th January 2024

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What is the Dollar to Naira Exchange rate at the black market also known as the parallel market (Aboki fx)?

How much is the Black market dollar to naira today, 26th January 2024?.

What is the Dollar to Naira Exchange rate at the black market, also known as the parallel market (Aboki fx)?

See the black market Dollar to Naira exchange rate for 25th January below. You can swap your dollar for Naira at these rates.

The exchange rate for a dollar to naira at Lagos Parallel Market (Black Market) players buy a dollar for N1,365 and sell at N1,370 on Wednesday 25th January 2024, according to sources at Bureau De Change (BDC).

How much is the Black market dollar to Naira today, 26th January 2024?

Please note that the Central Bank of Nigeria (CBN) does not recognize the parallel market (black market), as it has directed individuals who want to engage in Forex to approach their respective banks.

Dollar to Naira Black Market Rate Today
Buying Rate N1,390
Selling Rate N1,400

Please note TheCapital.ng does not set or determine forex rates, the rates you buy or sell forex may be different from what is captured in this article because prices vary.

 

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Economy

Nigeria spends $3.5 billion on debt service in 2023, up 55% YoY

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Nigeria incurred a debt service of $3.5 billion for its external loans in the fiscal year ended 2023 according to data from the Central Bank

Nigeria incurred a debt service of $3.5 billion for its external loans in the fiscal year ended 2023 according to data from the Central Bank of Nigeria (CBN).

The data is contained in the central bank’s latest Quarterly Statistical Bulletin.

This $3.5 billion spent represents a 55% increase from the $2.6 billion incurred in 2022 as debt service related payments for the country’s external debts.

Data from the Debt Management Office indicates Nigeria has a total external debt portfolio of $42.29 billion up from $41.69 billion in 2022.

According to the data published by the apex bank, Nigeria incurred $801.36 million, $368.26 million, $1,390.72 million and $943.17 million in the first, second, third and fourth quarter respectively.

Starting at $464.1 million in 2017, these costs have steadily escalated.

By 2018, the figure had more than tripled, peaking at $1.472 billion.

After a slight decrease in 2019 to $1.334 billion, the costs climbed annually, culminating in 2023’s record high of $3.503 billion.

The pattern indicates a growing dependence on external borrowing amidst challenging global economic conditions.

This substantial increase in debt servicing demands a large portion of Nigeria’s annual budget, restricting government spending in critical sectors such as health and education.

It also poses a risk to the nation’s economic growth and may deter foreign investment, essential for economic stability.

Nigeria’s rising external debt

Nigeria’s external debt, which is mostly denominated in dollars, has been rising in recent years as the country faced multi-year economic headwinds triggered by the Covid-19 Pandemic.

Nigeria’s external debt was just $27.6 billion but rose to $33.4 billion as Covid-19 forced the need for external support for frontier markets like Nigeria.

For example, the country added $3.5 billion in new IMF loans while the World Bank related International Development Association (IDA) loans rose to $11.1 billion from $9.6 billion.

By 2023 the IDA balances had risen to $14.9 billion as the country continued to rely on the World Bank.

Nigeria also tapped the commercial debt market with the Eurobond debt rising from $10.8 billion to $15.1 billion.

Loans from bilateral sources such as from China, France and other multilateral sources like the AfDB also rose in the last 5 years.

Nigeria also repaid a $500 million in Eurobond loans mid last year obtained 6 years ago at a coupon rate of 6.375% per annum.

Eurobond debts are typically paid out of the country’s external reserves or via a special fund designated for external bond repayments.

According to the DMO, the redemption now means Nigeria has now repaid a total of $1.8 billion in securities in the International Capital Market (ICM) over the past six years.

Government Actions
The Nigerian government has been actively seeking to address these issues through a variety of measures. For example,

There is a pressing need to improve debt management strategies, focusing on sustainable borrowing and securing concessional loans that offer more favorable terms.

Efforts to boost non-oil revenues and enhance tax collection efficiency are underway to reduce dependency on external borrowing.

Implementing policies that strengthen the economy’s fundamental aspects could help mitigate the impact of currency depreciation and improve Nigeria’s borrowing costs over the long term.

Nairametric

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Bag of rice falls to new price despite high inflation rate (See updated prices)

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The price of a bag of rice, a staple food in Nigeria, has dropped from N90,000 to between N42,000 to N67,000 in Abuja, Lagos, Ogun and

A 50-kilogram bag of rice (locally parboiled) in Abuja has decreased by 19 per cent to ₦68,000 from ₦84,000 it was sold for in February.

This development comes amidst the soaring price of food which rose to 40.01 per cent in March.

Recall that Nigeria’s inflation rate jumped to 33.20% in March 2024 compared to February 2024 headline inflation rate which was 31.70%.

This development has led to concerns amongst the citizenry, with many wondering why the Naira’s continued gain in the foreign exchange market did not impact the prices of goods and services.

Despite, the Inflation rate, a trader in Dutse market, Amaka Ubani told Daily Post that the price of rice dropped marginally to ₦68,000, from between ₦72,000 to ₦84,000 per 50kg of local rice.

“Well, at the moment, there is nowhere rice is sold at N60,000 per 50kg bag, but N68,000 from around N72,000 to 84,000 it was sold in March. Although customers are still complaining that it is still on the high side.

“Foreign rice like Royal Stallion and Mama Gold are not available in the market because they are expensive and mostly rebagged”, she added.

Foreign rice such as Mama Gold and Royal Stallion are sold at ₦90,000 per 50kg bag.

Similarly, Betty Retail shop in Kubwa market confirmed that it sells Big Bull rice at ₦68,000 per bag.

Other shops visited put their prices between ₦68,000 and ₦72,000 for a giant Big Bull and other varieties.

Naijanews

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Economy

FIRS: National single window will help Nigeria achieve 7% GDP growth annually

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Zacch Adedeji, chairman of the Federal Inland Revenue Service (FIRS), says the newly inaugurated national single window (NSW) project is a

Zacch Adedeji, chairman of the Federal Inland Revenue Service (FIRS), says the newly inaugurated national single window (NSW) project is a catalyst for achieving an average gross domestic product (GDP) growth rate of 7 percent annually in Nigeria.

Adedeji spoke on Tuesday during the inauguration of the project and the steering committee members in Abuja

The NSW, domiciled at the FIRS, is an electronic portal that links all agencies and players in import and export processes to an integrated platform.

Adedeji said the project aligns with President Bola Tinubu’s commitment to stimulating the economy, adding that the NSW would go a long way to unlocking the country’s true potential.

“As we strive towards achieving sustainable economic growth, we must embrace high-impact projects such as the national single window,” he said.

“By simplifying the government trade compliance process through a cutting-edge digital platform, we will unlock a myriad of economic benefits.

“This initiative will serve as a catalyst for achieving an average GDP growth rate of 7 percent annually, propelling Nigeria to new heights of prosperity.

“The national single window is not just a technological advancement; it is the gateway to a more connected, efficient, and transparent system.”

Adedeji said a seamless ecosystem that facilitates trade, saves time for businesses, and opens up a world of opportunities would be created by linking Nigeria’s ports, government agencies, and key stakeholders.

“From providing access to education and healthcare to enabling small businesses to reach global markets, digital connectivity is the key to unlocking Nigeria’s true potential,” Adedeji said.

“The heavy costs, delays, and inefficiencies at our ports have been a constant burden. It is estimated that a staggering $4 billion annually is lost due to these inefficiencies.

“By addressing revenue leakage prevention and facilitating effective trade, we will reclaim these lost resources and channel them towards the betterment of our society.

“The success stories of countries that have embraced single window systems are evident. Singapore, Korea, Kenya and Saudi Arabia have all witnessed significant improvements in trade efficiency after implementing similar initiatives.”

Adedeji said it is Nigeria’s turn to join the ranks of progressive nations and reap the rewards of a streamlined and digitised trade environment.

“The national single window is not just about facilitating trade; it is also a powerful tool for expanding our tax base and capturing the informal e-commerce sector,” he said.

“By providing a unified, modern digital platform for expeditious paperless cargo clearance and logistics, we will bring more businesses into the formal economy, ensuring that everyone contributes their fair share to our nation’s development.”

He also said by linking the NSW with other African nations, Nigeria will optimise intra-Africa trade and position the country as a leader in regional trade facilitation, fostering stronger economic ties and creating new opportunities for growth and collaboration.

Adedeji said improving trade facilitation, revenue generation, economic growth, transparency, security, and streamlined processes will transform Nigeria into a global trade powerhouse.

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Economy

Ten African countries with the most affordable internet rates

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Ten African countries with the most affordable internet rates

Internet connectivity is one of the most important drivers of economic growth. However, because of their economic status, it is expensive for many Africans.

According to experts, Africa needs to make internet access cheap and affordable for its citizens. According to research by Cable.co.uk, here is a list of African countries with the most inexpensive internet.

Malawi
The internet in Malawi is the cheapest in Sub-Saharan Africa. One gigabyte of data costs $0.38, which is about 400 in the Malawian currency. Interestingly, internet prices in Malawi used to be as expensive as $27.41 per gigabyte, which was a very high percentage of the citizen’s income.

Nigeria
Nigeria’s internet prices are the second cheapest in sub-Saharan Africa. One gigabyte of data costs $0.39, which is about N300, putting the country at 31st globally for the cheapest mobile data. However, these prices may differ according to the mobile provider and data plan.

Ghana
Ghana is third on the list, and a gigabyte of data costs about $0.40, which is about 4.60 Ghana Cedis.

Somalia
Somalia’s internet costs about $0.50, which is also the currency used in the country. However, some plans may fall as low as $0.19. Somalia has a very competitive telecommunication market, with several providers offering various data plans and rates. This competition helps to keep prices low for consumers. Sometimes, the most expensive data plans can get as high as $1.67 per gigabyte.

Democratic Republic of the Congo
Internet in DRC costs about $0.52 per gigabyte, with the cheapest being $0.36. DRC has many options for fixed internet plans, even though mobile data is more prevalent.

Rwanda
Rwanda’s internet costs $0.55 per gigabyte, which is 666.67 in the country’s currency. According to VisitRwanda, major cities in Rwanda have high-speed 4G LTE wireless broadband. WiFi networks are also available in high-end places like hotels. In recent years, the Rwandan government has invested heavily in building its internet infrastructure. This has led to a significant increase in internet penetration in the country.

Kenya
Internet in Kenya costs about $0.59 per gigabyte, equivalent to 86.11 KES. Kenya’s internet penetration is about 32.7 percent. Mobile phone data is more prominent as mobile network operators (MNOs) have extensive coverage nationwide.

Mauritius
Internet in Mauritius costs $0.67. Mauritius boasts of a high internet penetration rate, which data puts at 75.76 percent, with many homes enjoying internet access. Mauritius has invested in building a robust internet infrastructure, including two undersea cables for international internet capacity and plans for two more.

Sierra Leone
One gigabyte of data costs $0.67. However, depending on the plan, prices can range from as low as $0.64 to as high as $1.19 per gigabyte. Sierra Leone’s internet access is still developing, so it is only readily available in the capital city. It is also slower than the global average.

Congo
In Congo Brazzaville, one gigabyte of internet costs $0.68. It may sometimes move to $1 and even $5 at austere times. The internet here is slower than globally acceptable. Also, the lack of developed infrastructure, especially fibre optic cable networks, hinders wider internet access.

Six of the top 50 cheapest internet-cost countries in the world are in sub-Saharan Africa. Africa also has five of the ten most expensive countries in the world, with Zimbabwe being the most expensive on the continent and globally at $43.75. Saint Helena is next at $40.13, South Sudan is next at $23.70, the Central African Republic is next at $10.90, and Zambia is last at $8.01.

According to experts, internet usage has increased on the continent because of the adoption of smartphones, improved network infrastructure (4G and 5G), affordable data plans, the availability of mobile-friendly content, the popularity of social media and apps, and overall economic development in various regions.

 

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Economy

Tinubu to Nigerians: I’ll make inflation go down like exchange rate

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President Bola Tinubu has asked Nigerians not to lose faith in his administration over the skyrocketing inflation assailing the nation’s economy, assuring citizens that he and his team are working to “bring it down” like he did when the naira dipped drastically against the dollar.

Tinubu gave the assurance at the State House in Abuja while hosting members of his party, All Progressives Congress (APC), particularly those in the Presidential Campaign Council (PCC) and Independent Campaign Council (ICC) to Iftar Wednesday evening.

The Nigerian leader said it was evident that the economy was already “looking much better” than it was “a year ago” when “borrowing was higher,” implicitly taking a jab at his predecessor, Muhammadu Buhari, whose eight-year rule was characterised by taking heavy loans from other nations.

“The economy is looking much better,” Mr Tinubu said Wednesday evening. “Yes, we have challenges of inflation, but we will bring it down. When the exchange rate was going haywire, it looked like we were asleep, but we worked on it diligently, and it is going down; it is getting better.”

The president stressed that he was committed to restoring the lost dignity of Nigeria among its international counterparts.

“Borrowing was higher a year ago, but today, we are reengineering the financial landscape, and our revenue is expanding. And we are taking up our sovereignty and earning our respect back in the comity of nations,” Mr Tinubu added in the statement released by his media aide, Ajuri Ngelale.

The naira, which in February traded as high as N1825 to one dollar, has appreciated in value, trading at N1250 against the dollar as of Thursday afternoon, according to Aboki Forex, a website that publishes the official and parallel rates of the naira against dollar and other currencies.

But despite the naira’s gain in the international market, prices of goods and services have yet to come down, adversely affecting the purchasing power of citizens.

According to the National Bureau of Statistics, the inflation rate reached a record high of 31 per cent in March, up from 29.9 per cent in February.

At his inauguration in May 2023, Mr Tinubu scrapped the fuel subsidy, a move that caused inflation and distress to the economy, as the price of fuel rose sharply from N145 to N617.

 

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Business

Jobs losses loom as Nigerian banks battle to escape extinction

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Jobs losses loom as Nigerian banks battle to escape extinction

There is panic in the Nigerian financial sector over massive job losses as banks battle to meet the recently announced minimum capital requirements by the Central Bank of Nigeria.

The National President of the Association of Senior Staff of Banks, Insurance and Financial Institutions, Olusoji Oluwole, expressed these concerns during an interview with Channels Television on Monday.

He said the Association had already informed the CBN and the Ministry of Labour about the impact of the recapitalization exercise on workers in the sector.

“We are very aware of what happened in the past during such recapitalization programmes, the last being in 2005. We knew that some banks had to pull it through themselves, some through mergers, others through acquisition.

“It has an impact on the employment of workers; because of that experience, we have proactively acted by informing the Central Bank of Nigeria and the Ministry of Labour of the likelihood of the programme on our members.

“When things like this happen, there are bound to be jobs lost. We expect that there will be a lot of fairness in the actions of the banks and to ensure that our members are well protected and compensated”, he said.

DAILY POST recalls that the CBN raised the minimum capital requirements for commercial banks with international authorization, National Spread Regional, Merchant Banks, National Non-Interest Banks, and Regional Non-interest between 100 and 900 per cent last Thursday.

What the 2024 Recapitalization exercise means

With the move, the CBN proposed to achieve the $1 trillion economy of President Bola Ahmed Tinubu’s government.

Also, the bank said the exercise would engender the emergence of healthier banks with the capacity to underwrite larger levels of credit/loans.

The development came nearly 19 years after the apex bank had last conducted its recapitalization exercise in 2005 under former President Olusegun Obasanjo and Prof Charles Soludo as CBN governor.

According to reports, over 5,000 staff members of affected banks such as Oceanic bank, Fin Bank, Spring Bank, Union Bank, Intercontinental Bank, Stanbic IBTC, and others lost their jobs.

This is why the announcement of the 2024 recapitalization programme sent a shockwave across the country’s banking sector.

Banks’ available options

CBN had given all the banks 24 months, starting from April 1, 2024, to kick the ground running in meeting the new set capital benchmark.

Within the set period, Nigerian banks have been boxed into Injecting fresh equity capital through private placements, rights issue/or offer subscriptions, mergers and acquisitions( M & As) and Upgrades or downgrades of license authorization options.

It is left to banks to explore either option to escape extinction.

Controversy clause

Unlike in the 2005 recapitalization exercise, CBN placed a caveat that 2024 minimum capital requirements shall only comprise paid-up capital and share premiums, ruling out the shareholders’ funds.

The non-inclusion of the Shareholders’ Fund had raised dust among the sector’s players.

In his statement reacting to the development, Johnson Chukwu, CEO of Cowry Assets Management Limited, faulted the exclusion of retained earnings and advised the CBN to align the new capital requirements with industry dynamics to facilitate a seamless transition.

Will Nigerian Banks Survive 2024 Capitalization?

With the development, the top ten Tier 1 and 2, namely Guaranty Trust Bank, Zenith Bank, United Bank of Africa, Access Bank, First Bank of Nigeria, EcoBank, Stanbic IBTC, First City Monument Bank, Fidelity, Sterling and others, will have raised over N3.3 trillion minimum capital base in 24 months.

Meanwhile, Ernst and Young, a global financial services company, had earlier predicted that about 17 banks would survive recapitalization.

“In a worst-case scenario, i.e., given a capital multiplier of 15, about 17 out of 24 banks would not meet the new minimum capital,” it said.

Financial Experts Reactions

Speaking to DAILY POST on Monday, a renowned economist and former President and Chairman of the Council of Chartered Institute of Bankers, Prof Segun Ajibola, said many banks may be unable to meet the current requirements, especially the family-like banks in terms of ownership and operation.

The economist said that a successful banking recapitalization exercise could benefit the Nigerian economy if well implemented.

According to him, with the exercise, Nigeria’s domestic economy will enjoy the patronage of existing and new local and foreign investors to meet the capital requirements. However, he said the country needs to be mindful of how the ownership of Nigerian banks can be ceded to foreign interests.

“The recapitalization of Nigerian banks by their owners is no doubt an exercise that is long awaited due to the current value of Naira, and by extension the size of the bank’s financial position, when viewed globally. The current value has constrained the banks’ capacity to handle large ticket deals even within the domestic economy.

“Many banks may be unable to meet the current requirements, especially the family-like banks in ownership and operation. There may be voluntary and involuntary mergers and acquisitions.

“One only hopes that the situation of 2005, when banks formed ”unholy alliances” and strange bedfellows, those with conflicting orientations, cultures and governance practices, were forced together to save their shareholders from total loss, etc. Some banks may seek downgrades as a way out of pollution and dilution of their shareholders.

“It remains to be seen if the domestic economy can cough out the funds required to meet the required capital.

“However, the flow of foreign funds to the Nigerian economy by the existing and would-be shareholders will be a welcome development if it happens.

“There is a need for the authorities to assure potential investors of stable and consistent investment and exchange control policies for a safe and predictable investment environment, among others.

“The definition of what constitutes capital under the Basel Accord is shifting from Tier I to Tier III. As said earlier, it is hoped that the domestic economy will enjoy the patronage of existing and new local and foreign investors to meet the capital requirements.

“Again, one is mindful of the extent to which the ownership of Nigerian banks can be ceded to foreign interests.

“A successful banking recapitalization exercise can have a beneficial impact on the Nigerian economy. It can help to rejuvenate the overall growth of different sectors of the economy through appropriate, timely funding of economic activities.

“Yes, it has the likely effect of crowding out investments in other suitable areas of the economy. It can lead to some job losses. But the overall benefits outweigh these side effects if successfully executed”, he told DAILY POST.

On his part, the Chief Executive Officer of the Centre for the Promotion of Private Enterprise, CPPE, Dr Muda Yusuf, said that the real issue is that Nigeria’s soaring inflation has weakened the value of money over time, which makes recapitalization imperative and inevitable.

He, however, urged that the exercise be done to minimize shocks and disruptions to the banking system and the economy.

Yusuf added that the apex bank should caution all players in the banking sector against predatory and other anti-competitive practices in the industry because of the recapitalization policy.

He told DAILY POST: “The last major review of the minimum capital requirement was done in 2005, some 18 years ago. That was under President Olusegun Obasanjo, with Prof Charles Soludo as CBN governor.

“But since then, the value of the minimum capital has been significantly eroded by inflation. For instance, the official exchange rate in 2005 was about N130 to the dollar.

“This meant that the N25 billion for a national bank, for instance, was equivalent to $192 million. The naira equivalent today is about N250 billion. The International Banking license would be about $384 million, an equivalent of about N500 billion.

“The capitalization requirement has not increased materially in real terms when adjusted for inflation.

“The real issue is that inflation has weakened money’s value over time, making recapitalization imperative and inevitable.

“The essence is to ensure the safety of depositors’ funds, strengthen the financial system’s stability, deepen the banking system’s resilience and reposition the bank to support growth.

“Reports from the Central Bank of Nigeria attest that Nigerian banks have good soundness indicators. The industry Capital Adequacy Ratio as of January was 13.7 per cent, above the prudential threshold of 10 per cent.

“The Non-Performing Loans as a ratio of total loan assets was 4.81 per cent as against the prudential threshold of 5 per cent, which is also positive. The liquidity ratio is 40.14 against the prudential minimum of 30 per cent, which also reflects a healthy position.

“The summary is that based on the financial soundness metrics, Nigerian banks are judged to be generally healthy.

“However, this does not diminish the need for regulatory authority to ensure that this soundness and stability are preserved and improved, especially because of the recent macroeconomic headwinds.

“This, perhaps, is what informed the current policy of the CBN to review the capital base”, he stated.

Similarly, the CEO of SD & D Capital Management, Mr Idakolo Gbolade, said the recapitalization exercise will allow Nigeria to maintain its leading role in the African continent.

“The recapitalization of banks in categories is long overdue”, he told DAILY POST and advocated for the expansion of our economy.

“The time frame is very adequate as well. Some international banks have already envisaged this process and have started making provisions early enough. Banks that cannot meet the new capital requirements have mergers and acquisitions options.

“Nigeria has the highest GDP in Africa, and for us to maintain that position and operate a trillion-dollar economy, the banks must be adequately capitalized.

“A trillion dollar economy must have local capacity to initiate and execute million dollar transactions locally without foreign intervention in key areas of development like oil and gas, steel production, mining, mega construction projects and Public Private Partnerships with the government.

“This can only materialize if we have adequately capitalized banks that can rise to the occasion. Nigerian banks also need to take pride in Africa regarding capitalization because Nigerian banks are not among the most capitalized in Africa.

“Therefore, this new recapitalization policy will adequately position our banks for the emergency economy in Nigeria or Africa and worldwide.

“The exclusion of shareholders’ funds as additional Tier 1 capital shows the CBN wants to distinguish fresh funds from existing funds which could be subject to regulatory infractions because shareholders’ funds is not a statutory capital base”, he told DAILY POST.

The National President of the Association of Senior Staff of Banks, Insurance and Financial Institutions, Olusoji Oluwole, expressed these concerns during an interview with Channels Television on Monday.

He said the Association had already informed the CBN and the Ministry of Labour about the impact of the recapitalization exercise on workers in the sector.

“We are very aware of what happened in the past during such recapitalization programmes, the last being in 2005. We knew that some banks had to pull it through themselves, some through mergers, others through acquisition.

“It has an impact on the employment of workers; because of that experience, we have proactively acted by informing the Central Bank of Nigeria and the Ministry of Labour of the likelihood of the programme on our members.

“When things like this happen, there are bound to be jobs lost. We expect that there will be a lot of fairness in the actions of the banks and to ensure that our members are well protected and compensated”, he said.

DAILY POST recalls that the CBN raised the minimum capital requirements for commercial banks with international authorization, National Spread Regional, Merchant Banks, National Non-Interest Banks, and Regional Non-interest between 100 and 900 per cent last Thursday.

What the 2024 Recapitalization exercise means

With the move, the CBN proposed to achieve the $1 trillion economy of President Bola Ahmed Tinubu’s government.

Also, the bank said the exercise would engender the emergence of healthier banks with the capacity to underwrite larger levels of credit/loans.

The development came nearly 19 years after the apex bank had last conducted its recapitalization exercise in 2005 under former President Olusegun Obasanjo and Prof Charles Soludo as CBN governor.

According to reports, over 5,000 staff members of affected banks such as Oceanic bank, Fin Bank, Spring Bank, Union Bank, Intercontinental Bank, Stanbic IBTC, and others lost their jobs.

This is why the announcement of the 2024 recapitalization programme sent a shockwave across the country’s banking sector.

Banks’ available options

CBN had given all the banks 24 months, starting from April 1, 2024, to kick the ground running in meeting the new set capital benchmark.

Within the set period, Nigerian banks have been boxed into Injecting fresh equity capital through private placements, rights issue/or offer subscriptions, mergers and acquisitions( M & As) and Upgrades or downgrades of license authorization options.

It is left to banks to explore either option to escape extinction.

Controversy clause

Unlike in the 2005 recapitalization exercise, CBN placed a caveat that 2024 minimum capital requirements shall only comprise paid-up capital and share premiums, ruling out the shareholders’ funds.

The non-inclusion of the Shareholders’ Fund had raised dust among the sector’s players.

In his statement reacting to the development, Johnson Chukwu, CEO of Cowry Assets Management Limited, faulted the exclusion of retained earnings and advised the CBN to align the new capital requirements with industry dynamics to facilitate a seamless transition.

Will Nigerian Banks Survive 2024 Capitalization?

With the development, the top ten Tier 1 and 2, namely Guaranty Trust Bank, Zenith Bank, United Bank of Africa, Access Bank, First Bank of Nigeria, EcoBank, Stanbic IBTC, First City Monument Bank, Fidelity, Sterling and others, will have raised over N3.3 trillion minimum capital base in 24 months.

Meanwhile, Ernst and Young, a global financial services company, had earlier predicted that about 17 banks would survive recapitalization.

“In a worst-case scenario, i.e., given a capital multiplier of 15, about 17 out of 24 banks would not meet the new minimum capital,” it said.

Financial Experts Reactions

Speaking to DAILY POST on Monday, a renowned economist and former President and Chairman of the Council of Chartered Institute of Bankers, Prof Segun Ajibola, said many banks may be unable to meet the current requirements, especially the family-like banks in terms of ownership and operation.

The economist said that a successful banking recapitalization exercise could benefit the Nigerian economy if well implemented.

According to him, with the exercise, Nigeria’s domestic economy will enjoy the patronage of existing and new local and foreign investors to meet the capital requirements. However, he said the country needs to be mindful of how the ownership of Nigerian banks can be ceded to foreign interests.

“The recapitalization of Nigerian banks by their owners is no doubt an exercise that is long awaited due to the current value of Naira, and by extension the size of the bank’s financial position, when viewed globally. The current value has constrained the banks’ capacity to handle large ticket deals even within the domestic economy.

“Many banks may be unable to meet the current requirements, especially the family-like banks in ownership and operation. There may be voluntary and involuntary mergers and acquisitions.

“One only hopes that the situation of 2005, when banks formed ”unholy alliances” and strange bedfellows, those with conflicting orientations, cultures and governance practices, were forced together to save their shareholders from total loss, etc. Some banks may seek downgrades as a way out of pollution and dilution of their shareholders.

“It remains to be seen if the domestic economy can cough out the funds required to meet the required capital.

“However, the flow of foreign funds to the Nigerian economy by the existing and would-be shareholders will be a welcome development if it happens.

“There is a need for the authorities to assure potential investors of stable and consistent investment and exchange control policies for a safe and predictable investment environment, among others.

“The definition of what constitutes capital under the Basel Accord is shifting from Tier I to Tier III. As said earlier, it is hoped that the domestic economy will enjoy the patronage of existing and new local and foreign investors to meet the capital requirements.

“Again, one is mindful of the extent to which the ownership of Nigerian banks can be ceded to foreign interests.

“A successful banking recapitalization exercise can have a beneficial impact on the Nigerian economy. It can help to rejuvenate the overall growth of different sectors of the economy through appropriate, timely funding of economic activities.

“Yes, it has the likely effect of crowding out investments in other suitable areas of the economy. It can lead to some job losses. But the overall benefits outweigh these side effects if successfully executed”, he told DAILY POST.

On his part, the Chief Executive Officer of the Centre for the Promotion of Private Enterprise, CPPE, Dr Muda Yusuf, said that the real issue is that Nigeria’s soaring inflation has weakened the value of money over time, which makes recapitalization imperative and inevitable.

He, however, urged that the exercise be done to minimize shocks and disruptions to the banking system and the economy.

Yusuf added that the apex bank should caution all players in the banking sector against predatory and other anti-competitive practices in the industry because of the recapitalization policy.

He told DAILY POST: “The last major review of the minimum capital requirement was done in 2005, some 18 years ago. That was under President Olusegun Obasanjo, with Prof Charles Soludo as CBN governor.

“But since then, the value of the minimum capital has been significantly eroded by inflation. For instance, the official exchange rate in 2005 was about N130 to the dollar.

“This meant that the N25 billion for a national bank, for instance, was equivalent to $192 million. The naira equivalent today is about N250 billion. The International Banking license would be about $384 million, an equivalent of about N500 billion.

“The capitalization requirement has not increased materially in real terms when adjusted for inflation.

“The real issue is that inflation has weakened money’s value over time, making recapitalization imperative and inevitable.

“The essence is to ensure the safety of depositors’ funds, strengthen the financial system’s stability, deepen the banking system’s resilience and reposition the bank to support growth.

“Reports from the Central Bank of Nigeria attest that Nigerian banks have good soundness indicators. The industry Capital Adequacy Ratio as of January was 13.7 per cent, above the prudential threshold of 10 per cent.

“The Non-Performing Loans as a ratio of total loan assets was 4.81 per cent as against the prudential threshold of 5 per cent, which is also positive. The liquidity ratio is 40.14 against the prudential minimum of 30 per cent, which also reflects a healthy position.

“The summary is that based on the financial soundness metrics, Nigerian banks are judged to be generally healthy.

“However, this does not diminish the need for regulatory authority to ensure that this soundness and stability are preserved and improved, especially because of the recent macroeconomic headwinds.

“This, perhaps, is what informed the current policy of the CBN to review the capital base”, he stated.

Similarly, the CEO of SD & D Capital Management, Mr Idakolo Gbolade, said the recapitalization exercise will allow Nigeria to maintain its leading role in the African continent.

“The recapitalization of banks in categories is long overdue”, he told DAILY POST and advocated for the expansion of our economy.

“The time frame is very adequate as well. Some international banks have already envisaged this process and have started making provisions early enough. Banks that cannot meet the new capital requirements have mergers and acquisitions options.

“Nigeria has the highest GDP in Africa, and for us to maintain that position and operate a trillion-dollar economy, the banks must be adequately capitalized.

“A trillion dollar economy must have local capacity to initiate and execute million dollar transactions locally without foreign intervention in key areas of development like oil and gas, steel production, mining, mega construction projects and Public Private Partnerships with the government.

“This can only materialize if we have adequately capitalized banks that can rise to the occasion. Nigerian banks also need to take pride in Africa regarding capitalization because Nigerian banks are not among the most capitalized in Africa.

“Therefore, this new recapitalization policy will adequately position our banks for the emergency economy in Nigeria or Africa and worldwide.

“The exclusion of shareholders’ funds as additional Tier 1 capital shows the CBN wants to distinguish fresh funds from existing funds which could be subject to regulatory infractions because shareholders’ funds is not a statutory capital base”, he told DAILY POST.

Source: Daily Post

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