Consequently, the apex bank must keep the banks and their CEOs under strict surveillance.

Sooner than later, the Bourse will be brimming with hyperactivity with the issuance of common shares by banks by way of public offer and right issues, in realignment with the new realities. Private placements and foreign inflows would be aplenty too.  But there is a big concern: the possibility of abuse of the process. Should it happen, it will open the floodgates to denizens of money laundering and treasury looters to hijack the system and become de facto owners of our bankers.

Ramp up your minimum capital base or lose your operating license, was a directive from the Central Bank of Nigeria (CBN), to all the banks, in a major monetary policy shift announced last month. It was stripped of its natural tremulous nuance by our extant economic realities and the CBN governor, Yemi Cardoso’s forewarning at different fora. The most manifest of these overtures was given at the Annual Bankers Dinner in November 2023.

There are 26 commercial banks in the country operating in three categories – international, national or regional. Each of them will transit from the old minimum share capital base of N25 billion to new thresholds, except the few non-interest banks, with newer N20 billion and N10 billion paid up capital requirements for national and regional operations, respectively.

Banks in the international orbit will have a N500 billion minimum share capital; the national ones – N200 billion and regional banks – N50 billion. Five of the banks in the upper reaches are Zenith Bank, First Bank, United Bank for Africa (UBA), Access Bank and GTBank. Combined, they do not have N500 billion of paid capital. This shows how vulnerable the smaller banks are to inadequacy of the new capital threshold. Thus, the race to beat the CBN’s 2026 deadline will be a riveting journey of survival for them.

In Cardoso’s view, a solid banking system is imperative in driving President Bola Tinubu’s vision of a Nigeria with a $1 trillion Gross Domestic Product (GDP) economy in the next seven years. The new minimum capital requirement, therefore, aggregates to N7.5 trillion, as against the banks’ present combined fiscal muscle of N2.5 trillion. This leaves a gaping fiscal hole of N5 trillion to be filled up.

Besides the ambitious $1 trillion target, the ravenous economic environment headlined by the devaluation of the naira and hyper-inflation presently rooted at 31.70 per cent, sparked by Tinubu’s misbegotten or badly executed policies of fuel subsidy removal and foreign exchange liberalisation, at the same time, have all conflated to effectively erode the capital base of these banks.

As one financial analyst observed, N25 billion as capital base of a bank now, with the current predatory exchange rate, which was above N2,000 to a dollar in the parallel market as of last month, is about $18 million. This is in contradistinction to the 2005 scenario when the same N25 billion was valued at about $188 million. The exchange rate was then at N130 to a dollar. Therefore, there couldn’t have been better grounds for the a demand for raising the capital base of banks.

Equally crucial should be CBN’s consciousness that “big banks” in themselves count for little, shorn of strong risk management and a good corporate governance tapestry. The failure of Washington Mutual, the biggest for US banks in 2008, with its $300 billion assets and $188 billion in deposit is a big lesson here. It was then the sixth largest US bank. More recently, First Republic Bank and Silicon Valley Bank have become footnotes in US economic annals because of a mix of poor risk management and wayward growth strategies.

Nigeria has travelled this road before with acclamation in 2004/25, when Professor Chukwuma Soludo was the CBN governor. From N2 billion, the capital base was elevated to N25 billion, in a seismic swing that reduced the number of banks from about 87 to 30. This consolidated the system and bolstered the economy thereafter. The impact of the new liquidity regime should be much more.

Unlike in the previous epoch, share holders’ funds and retained profits would not be part of each bank’s paid up capital this time. This will turn the envisioned fiscal architecture into a Sisyphean undertaking. Certainly, the banks will be chagrined and might protest. It is not clear yet why this is so. What is no doubt, however, is that not all the banks will scale through the hurdle. Mergers, acquisitions, and, sadly, extinctions are inexorably intertwined with this move, given the benefit of hindsight. The number of jobs to be lost in the process is unknown yet. The last recapitalisation rendered over 5,000 workers jobless.

This unintended downside could be mitigated if some banks without the capacity to pass through the new fiscal demand eschew pride and downgrade to a level they can easily operate in within the three categories of licenses. Only non-interest banks are in a comparatively safe zone. With the present savagery of the high cost of living, bank workers to be affected should be adequately compensated to face the odd new fate.

Sooner than later, the Bourse will be brimming with hyperactivity with the issuance of common shares by banks by way of public offer and right issues, in realignment with the new realities. Private placements and foreign inflows would be aplenty too. But there is a big concern: the possibility of abuse of the process. Should it happen, it will open the floodgates to denizens of money laundering and treasury looters to hijack the system and become de facto owners of our bankers. Their ill-gotten funds are in private and corporate crevices, waiting for an opportune moment like this, to be unleashed on the economy. With sundry national ills, this is a new burden that shouldn’t be added.

While the new fiscal symphony will undoubtedly enhance the solvency and resilience of banks, the eye catcher is how it will gnaw at their inclination to profiteering lending rates, at 26 per cent and above. There can’t be a better way to catalyse economic growth than providing credits to businesses at single digit interest.

Equally crucial should be CBN’s consciousness that “big banks” in themselves count for little, shorn of strong risk management and a good corporate governance tapestry. The failure of Washington Mutual, the biggest for US banks in 2008, with its $300 billion assets and $188 billion in deposit is a big lesson here. It was then the sixth largest US bank. More recently, First Republic Bank and Silicon Valley Bank have become footnotes in US economic annals because of a mix of poor risk management and wayward growth strategies.

Banks need to refocus their risk management frameworks in order to keep customers deposits safe in this age of astronomical cyber criminality, reduce their capital impairment and enforce the country’s anti-money laundering law with vim. Without these redemptive grains, the quest for new financial stability and massive GDP growth would end up as mere fantasy.

When banks misbehave, as they are wont to, to enrich their bottom lines, they should be halted in their tracks as institutions of public trust. In jurisdictions that care for the public good, uncompromising legal systems serve as guardrails. No bank cuts corners, say in the US or UK, without being reined in. Standard Chartered Bank, for instance, was fined a total of $1.1 billion in 2019, for violating anti-money laundering laws by the US and UK authorities. A UK subsidiary of a Nigerian new generation bank, described as a serial offender, was slammed with £7.6 million in 2023 by that country’s Financial Conduct Authority. The examples are legion.

As a country, we should reflect deeply on why financial crimes have been allowed to fester to the point of being, in my view, the biggest industry in the country. This is evident in the serial brazen plundering of public treasury since the dawn of the Fourth Republic. Under the extant anti-money laundering law, banks must be alerted over cash deposits in excess of N5 million by individuals and N10 million by corporate bodies, respectively.

Had this been the case, the Economic and Financial Crimes Commission (EFCC) and its sister agency, ICPC, would not be tracing hundreds of billions of naira to the bank accounts of suspects during investigations. The simple fact is: banks provide criminals with cover, and are chaperoned by our willing corrupt judicial system to get away. By so doing, the rule of law is effectively defanged. A degenerate fiscal and jurisprudential ecosystem like this would be alien to the urgency now, without a far-left makeover.

Consequently, the apex bank must keep the banks and their CEOs under strict surveillance. This is not done through rhetoric. Since the forced exit of Sanusi Lamido Sanusi as a CBN governor, these CEOs never get caught in the labyrinth of abuses and collusion with financial criminals for which maximal penal clamp down should have been invoked. Shake the table, Cardoso.

It was a weak regulatory/enforcement tapestry in our financial system that aided fuel subsidy thieves to siphon as much as they wanted from public funds they ordinarily should not have had access to, from the NNPC, unchecked. No matter how the country pretends to preen its image, it will take a while for those outside our shores to echo any attempts at re-engineering. Not with the February 2024 Financial Action Task Force damning report on Nigeria as among nations under its watchlist for money laundering. This should inform a new vision of CBN’s gravity as a regulator.

Banks need to refocus their risk management frameworks in order to keep customers deposits safe in this age of astronomical cyber criminality, reduce their capital impairment and enforce the country’s anti-money laundering law with vim. Without these redemptive grains, the quest for new financial stability and massive GDP growth would end up as mere fantasy.