RECAPITALIZATION OF NIGERIAN BANKS AND ITS IMPACT ON THE CAPITAL MARKET- ASHON CHAIRMAN

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Olori Uwem

Member
Mar 18, 2024
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RECAPITALIZATION OF NIGERIAN BANKS AND ITS IMPACT ON THE CAPITAL MARKET- ASHON CHAIRMAN:

1. Recapitalization Requirements:
- The Central Bank of Nigeria (CBN) announced new capital base requirements for banks, ranging from N200 billion to N500 billion, based on the bank’s authorization level.
- Banks have been given two years to meet these new requirements.

2. Market Impact:
- Sam Onukwue, Chairman of the Association of Securities Dealing Houses of Nigeria (ASHON), stated that these new requirements will boost the primary segment of the Nigerian capital market, which has been largely dormant.
- The recapitalization is expected to reignite market activities, particularly initial public offerings (IPOs).

3. Economic Context:
- Onukwue noted that the increased risks faced by banks due to macroeconomic challenges necessitate a stronger capital base.
- This move aligns with the goal of positioning Nigerian banks for global competitiveness and supporting Nigeria's goal of becoming a $1 trillion economy in the next seven to eight years.

4. Primary Market Inactivity:
- The primary market has been inactive due to economic slowdowns and companies' reluctance to launch IPOs due to fears of under-subscription.
- Many investors have lost money because some companies did not list their shares in the secondary market after raising capital.

5. SEC Regulations:
- The Securities and Exchange Commission (SEC) has announced new rules for the primary market to curb abuses in fund-raising.
- These regulations include stringent measures and hefty fines for non-compliance, aiming to protect investors and ensure transparency in capital raising.

6. Future Prospects:
- The SEC is preparing a framework to guide the capital market during the banks' recapitalization exercise.
- This framework aims to settle outstanding matters in the best interests of the market.

These points highlight the potential positive impact of the CBN's new capital requirements on the Nigerian capital market, the economic rationale behind the move, and the regulatory measures being implemented to ensure market stability and investor protection.