The Central Bank of Nigeria has allayed fears that the negative effects of the COVID-19 challenges on the world economy would put unbearable stress on the Nigerian banking sector and necessitate urgent recapitalisation after the pandemic.

There had been unconfirmed reports by analysts that the CBN had sent fresh signals to banks to warm up for urgent recapitalisation, post-COVID-19, as a result of the huge stress the disruption in the world economy had put on the banking sector.

But the Director, Corporate Communications of the CBN, Mr. Isaac Okorafor, told The POINT that the Governor of the Central Bank of Nigeria had not been specific about timing, though he made a statement on recapitalisation sometime last year, indicating that such insinuations could trigger panic in the system.

A financial analyst, Dr. Aderemi Adepoju, told our correspondent that Nigerian banks would not escape “compulsory recapitalisation immediately after the world is done with COVID-19 challenges. Signals are already going out from the CBN to banks to this effect.”

He noted that the banks could not fund big transactions prior to the lockdown on the world economy, adding that the ongoing stress would further weaken already weak banks.

“The CBN has made it clear to the banks that they must recapitalise immediately after COVID-19 restrictions to avoid a banking crisis,” he said.

Okorafor, however, said, “It is not true. This is an old statement the Governor made last year, that there may be some recapitalisation in the near future. He wasn’t definite as to timing. Unless the fellow wants to trigger panic in the system.”

The CBN Governor. Mr. Godwin Emefiele, had said in June last year, while unveiling his economic agenda for the next five years, that the drop in the value of the naira to the dollar had weakened the capital of banks.

Emefiele said going by the huge developmental role the apex bank would want the banks to play in the next five years, recapitalisation of banks had become imperative.
He had said the Committee of Governors of the CBN would meet to discuss the new policy.
Meanwhile, the International Monetary Fund had projected a contraction in the global economy by -3 per cent this year.

For sub-Saharan Africa, the IMF, in its latest World Economic Outlook report, projected a contraction of -1.6 per cent, with Nigeria topping the chart with a negative growth of -3.4 per cent, indicating a looming recession for the country.

Though the negative growth was hinged on plummeting oil prices and food inflation, even as the latest report deviates from the IMF’s earlier projection of 2.5 per cent growth for 2020 and 2021, analysts have said that post-COVID-19 economic challenges would deal a bigger blow.
The Minister of Finance, Zainab Ahmed, had warned that Nigeria could fall into its second recession in five years if drastic actions were not taken to cushion the economy. She estimated that the economy could shrink by as much as 3.4 per cent this year without a massive stimulus plan that includes billions in Central Bank, Federal Government and international support.
Culled from The Point online


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