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 Daily
Independent Online.
* Wednesday, June 30, 2004.
Nigerian banks are poorly capitalised at N2b - CIBN
Stories by Esan Sunday
Snr. Finance Correspondent,Lagos
For Nigerian banks to move at
par with development in the advanced economy, the Chartered Institute of
Bankers of Nigeria (CIBN) has stated that the recently increased capital
base of banks to N2 billion is still very low for banks that want to
operate in the international market.
CIBN President, Mr. Samuel Kolawole,
revealed this at the ��Banking and Finance�� seminar organised by the
Institute of Directors in Lagos, recently.
He explained that when converted to a foreign currency,
it would be so obvious that Nigerian banks, even with N2 billion
capital-base were still grossly under-capitalised.
According to him, �banks capitalisation
requirement in Nigeria even at the new N2 billion prescribed for every
bank may not necessarily provide the required solution. Competition at
the global market requires robust capitalisation that can serve as shock
absorber for the expanded risk exposure involved. With the depreciating
naira, linking of the capitalisation of Nigerian banks to a stable
convertible currency will show how poorly capitalised Nigerian banks are.�
It would be recalled that the apex bank in
its 2004/5 monetary policy stated that by December 2005, all banks in
operation must increase their capital base to a minimum of N2 billion to
enable them take up big businesses.
�In view of the need to strengthen the operational
capacity of deposit money in banks and minimize the risk of distress, new
banks were required to provide a minimum paid up capital of N2.0 billion
effective 2001, while the existing banks were required to raise their
capital base to N1.0 billion by end-2002. In order to ensure a strong
financial base for banks and enhance public confidence in the banking
industry, all existing banks are encouraged to raise their minimum
paid-up capital to N2.0 billion by end-2005.�
Meanwhile, about 35 banks as at the end of
2002 were yet to increase their capital base to N1 billion as earlier
directed by the apex bank.
For Nigerian banks to compete at the
international market the CIBN chief said aside the need to fully embrace
the concept of corporate governance, there is also the need for a highly
trained and motivated workforce �whom I can say is crucially inadequate
in the Nigerian financial industry as at today.�
He said the training of the workforce has
to be on a continuous basis to ensure that staff are at the cutting edge
of the technology in use and also that such technology calls for
consistent updating.
Commenting on the depth of the nation�s
financial system, which he described as being very shallow, he said the
shallowness of the Nigerian financial market would make competition at
the global market unfavourable for the Nigerian financial institutions.
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