Still battling to grapple with the barrage of criticism that trailed its new N25billion capitalization policy, the Central Bank of Nigeria (CBN) has explained that the policy is not a punitive measure and that any bank that fails to meet the capitalization requirement within the stipulated time would not be liquidated or delicenced.
However, banks have continued their battle to sustain depositors’ confidence in their banks through letters reassuring them of their readiness to meet the new capital base, following massive withdrawals and deluge of inquiries from customers.
Sunday Vanguard findings last week revealed that some banks have written their net worth customers, assuring them of their preparedness to meet the new challenge.
Explaining that the policy is a proactive one aimed at stimulating the banking industry, the apex bank’s Deputy Director of Corporate Affairs, Mr. Tony Ede, in a chat with Sunday Vanguard stated that any non-compliant bank at the expiration of the time frame would be suspended from participating in the Dutch Auction System (DAS) and other financial activities of the Central Bank.
His words: “What we are saying is that in Nigeria, there will be small banks, but the smallest bank in Nigeria should have capitalization of N25 billion. That is the minimum capital base. And we are not saying we will liquidate the bank. If you do not have the capitalization of N25 billion, we will not let you participate in the Dutch Auction System (DAS) and we will withdraw public fund from such bank. And we will announce those that have made the capitalization”.
He further noted that the CBN was not contemplating to reverse the decision in spite of the flurry of criticism that has trailed the policy, adding “there are different interests in the issue at hand. We are going against well entrenched interest in the system. We have to do this to avoid experiencing banking crisis Malaysia experienced.
Expressing surprise at why mergers initiative aimed at strengthening the banks would cause much furore, Ede asked: “Is it better to own 100 per cent of a business that is not thriving than to own two to five per cent of a business that is doing very well?”
Remarking that the Nigerian economy is worth about $65 billion, he said that the former N2billion capital base was too meagre for a banking business, especially when the world has become a global village.
Reiterating that the total asset of the 89 banks in Nigeria is about $22billion as against the over $50billion of a South African ABSA Bank, he asked: “How can yo be an African player with this negligible assets worth?”
Assuring customers of its capability to meet the new capital base, Afribank Plc. stated: “With the capital base requirement, what Afribank is concentrating its efforts now is consolidating and expansion of its market share, customer base and further diversification of its operations. With the ever highly liquid position of the bank, there is no cause for alarm. Apart from the regulatory protection of funds in banks, Afribank’s ethical standard in the industry is excellent”.
