The Chairman of the Association of Securities Dealing Houses of Nigeria, Sam Onukwue has stated that the newly proposed capital requirements for banks will ignite the primary component of the Nigerian capital market.
This was disclosed in a statement on Monday by Onukwue, according to The Punch.
According to Onukwue, the market has remained essentially dormant for some years due to a lack of issues.
The CBN had on March 28, announced increased capital base requirements for banks ranging from N200 billion to N500 billion, depending on the bank’s authorization level.
The apex bank allowed lenders two years to raise their capital, reposition Nigerian banks for global competitiveness, and align them with the demands of the African Continental Free Trade Area.
Onukwue commended the CBN’s decision, stating that the increased risks faced by banks, worsened by macroeconomic issues, required a higher capital basis.
He noted that this would allow banks to sustain unexpected losses while also preparing them to support Nigeria’s projected $1 trillion economy over the next seven to eight years.
He stated “I believe that the Central Bank of Nigeria has done the right thing if our banks should compete in the global market, including the African Continental Free Trade Area. With the current inflation rate and exchange rate, it has become almost impossible for our banks to operate in line with the new global minimum capital threshold.
“Besides, the level of risks which the banks bear today has significantly been exacerbated by the current macro-economic vagaries. I also believe the apex bank is repositioning the banks to be o able to finance the envisaged $1tn economy in the next 7-8 years.
“In light of the foregoing, I do not doubt that the apex bank is fair enough to base the new share capital on the level of authorization of each bank.”
Onukwue stated that the primary market’s inactivity was attributable to economic slowdowns and corporations’ unwillingness to undertake initial public offerings for fear of under-subscription.
“The primary market has been relatively inactive over the years because of the general lull in the economy. Potential companies that would have floated initial Public Offerings were reluctant for fear of undersubscription.
“To worsen the situation, many investors have lost money in the primary market due to the failure of companies to list their shares in the secondary market after capital raising in the primary market. However, with the directive on banks’ recapitalisation, activities shall bounce back in the primary market,” he explained.
