November 25, (THEWILL) – The Central Bank of Nigeria (CBN) has advised the deposit money banks to be prepared to boost their capital base in order to meet the need of the envisioned $1 trillion economy of the President Bola Tinubu administration.
The apex bank has also vowed to go after the licensed payment service providers that have parted way with the prescribed rules in order to safeguard the integrity of the nation’s financial services industry.
These disclosures were made by the CBN Governor, Dr Olayemi Cardoso, in his speech at the Chartered Institute of Bankers of Nigeria (CIBN) 58th Annual Bankers’ Dinner and Grand Finale of the Institute’s 60th Anniversary held at the Eko Hotels in Lagos, on Friday, November 24, 2023.
Dr Cardoso said, while there has been stability in the banking sector, banks in the country were not adequately capitalised to meet the need of a $1 trillion economy which the present government aims to achieve within seven years.
“Will Nigerian banks have sufficient capital relative to the finance system’s needs in servicing a one trillion dollar economy in the near future? In my opinion, the answer is no, unless we take action,” he said.
“Therefore, we must make tough decisions regarding capital adequacy. As a first step, the Central Bank will be directing banks to increase their capital”, Cardoso added, stressing that the policy measures adopted by the new CBN leadership have started showing results.
The CBN boss also stressed the importance of technology in delivering financial services as well as enhancing the much desired financial inclusion which the Bank had vigorously pursued over the years.
He however lamented over the erring behaviour of some licensed payment operators which he said had deliberately deviated from their prescribed scope of operations to breach their licences, thereby negating the benefits of technology in the financial services sector.
His words, “Technology will continue to play a critical role in delivering financial services and enhancing financial inclusion.
“However, recent developments in the payment services landscape have raised concerns regarding the use of technology and the existing licensing and regulatory framework.
“We have observed that some licensees are operating outside the approved activities, breaching the boundaries set for them.
“Any intentional or unintended non-compliance will be subject to sanctions, as operators have the responsibility to ensure that they are licensed for the activities they undertake.”
The CBN boss said the apex bank will adopt a strategy aimed at promoting the desired change in the technology-driven banking industry to ensure that the banks that have made progress build on the milestones achieved.
He also said the CBN will strengthen its internal system to be able to assist the banks it supervises in achieving their desired goals.
“Concurrently, as we conduct a comprehensive review of the licensing framework for payment services, we will engage in extensive consultations to develop a new regulatory and compliance framework that is suitable for the technology-driven payment services sector.
“Looking ahead for the industry, banks should reassess the responsible banking framework to ensure that the requirements are effectively integrated into their strategies.
“I am aware that some banks have made commendable progress in this regard. Furthermore, the Central Bank of Nigeria is taking steps to enhance its in-house capacity so that it can assist other banks that still have progress to make in implementing their sustainability principles,” he said.
Cardoso acknowledged the economic challenges confronting ordinary Nigerians in both the urban and rural areas and assured that the CBN will initiate policies that would energise the creative abilities of the Nigerian citizens in their various callings.
To achieve this, he said there will be renewed commitment towards promoting the micro, small and medium enterprises which constitute the engine of the economy.
He commended the resilience of the banking industry amid global and domestic challenges, noting that available data showed the soundness of the Nigerian financial services institutions.
“Indeed, despite the challenging global and domestic macroeconomic environment, Nigeria’s financial sector has demonstrated resilience in 2023, with key indicators of financial soundness largely meeting regulatory benchmarks.
“Stress tests conducted on the banking industry also indicate its strength under mild-to-moderate scenarios of sustained economic and financial stress, although there is room for further strengthening and enhancing resilience to shocks,” he stated.
About the Author
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
