Bank Recapitalisation, Others Key to $1trn Economy- Agama

Samuel Mobolaji

The director-general of the Securities and Exchange Commission (SEC), Dr Emomotimi Agama has said, Nigeria needs to address critical sectors as well as leverage a recapitalised banking sector in order to unlock its potentials and achieve a trillion-dollar economy.

Agama stated this at a Forum on steps towards the ongoing banks recapitalization in Abuja. He said, the nation needs to diversify the economy beyond oil exports, invest in infrastructure, human capital and innovation, enhance the business environment and reduce regulatory hurdles as well as promote financial inclusion and access to credit for SMEs and individuals.

He added that, “banking recapitalization can indeed play a significant role in catalyzing a trillion-dollar economy through the capital market. The capital market plays a crucial role in this process by providing banks with access to various financing options, such as equity financing, debt financing and rights issues.

“Recapitalisation through the capital market can help banks meet regulatory capital requirements, improve capital adequacy ratios, increase lending capacity, enhance financial stability, restore investor confidence, enhanced investor confidence and better risk management.”

The SEC boss said, a recapitalised banking sector can lead to increase lending to key sectors like agriculture, manufacturing, and infrastructure, driving economic growth, enhance banks’ ability to underwrite large-ticket transactions, supporting big projects and industries as well as attract foreign investors, boosting capital inflows and deepening the capital market.

According to Agama, recapitalisation could also encourage listing of banks and other companies on the Nigerian Exchange Limited (NGX), increasing market capitalization and foster a stable financial system, reducing systemic risk and promoting economic stability adding that, the Nigerian Exchange platform designed to streamline public offerings and Rights Issues in the market is a viable channel for boosting investments and would assist in the attainment of a better economy.

The SEC DG stated that, recapitalisation can also have challenges, which includes share price dilution, increased debt servicing and regulatory hurdles among others.

The SEC recently released a framework which aims to ensure a smooth, transparent, and efficient capital-raising process for banks and holding companies participating in the recapitalisation programme.

This framework outlines the guidelines and procedures banks are required to follow to raise capital through rights issuance, private placements, or other approved methods during the 2024-2026 recapitalisation period.

The SEC acknowledged the rationale behind the CBN’s directive, highlighting the need to strengthen banks’ asset base and support economic growth in line with the government’s ambitious target of achieving a $1 trillion economy by 2030.