The Head of Corporate Banking Group and Chief Operating Officer at Ecobank Transnational (ETI), Dr. Bunmi Bajomo has stated that Nigerian banks cannot compete with their peers in North and East Africa based on foreign currencies.
She stated this during the Naira metrics’ Economic webinar tagged- CBN policies and its wider impact on the wider economy where she rationalised the apex bank’s move towards recapitalisation of banks.
According to her, Nigerian banks have seen severe economic headwinds in the past few years from covid-19 pandemic and significant depreciation of the naira serves as genuine reasons for the recapitalisation exercise.
- She stated, “In conclusion, as we stand today, Nigerian banks cannot effectively compete with their peers in North Africa, East Africa based on foreign currency. If we are saying the total industry asset is $45 billion, don’t forget that most of the FUGAZ banks already have asset size of well above 17. So are we going forward or we are receding”
Exclusion of retained earnings to absorb shocks
Furthermore, she provided subtle justification for the CBN’s decision to exclude retained earnings when calculating the bank’s new capital noting that perhaps it is meant to absorb shocks given the severe macroeconomic headwinds the banking industry in Nigeria have been made to endure in the past few years.
Recapitalisation to lead to de-concentration of banking industry
Also, she noted that the recapitalisation exercise by the apex bank would like lead to a de-concentration of the banking industry providing an opportunity for smaller banks to grow in capacity and process larger volumes of trade.
She referenced the current reality in the industry where the top 5 banks were responsible for the 80% of total loans disbursed and about 81% of total deposits- a situation which she hoped will be reversed given the antecedents from the 2004/2005 recapitalisation exercise that increased the size of banks significantly.