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Tag: Recapitalisation

  • Bank recapitalisation crucial to achieving $1trn economy – CBN

    Bank recapitalisation crucial to achieving $1trn economy – CBN

    The Central Bank of Nigeria (CBN), says recapitalisation of Nigerian banks is crucial to the march towards achieving a one-trillion dollar economy.

    CBN’s Deputy Governor, Corporate Services, Emem Usoro, said this on Monday in Abuja, at the ongoing 36th edition of the Finance Correspondents Association of Nigeria (FICAN).

    The theme of the seminar is, “Banking Recapitalisation Towards a One Trillion Dollar Economy ”.

    Usoro’s address was delivered by Mrs Hakama Sidi-Ali, CBN’s, the Acting Director, Corporate Communications Department.

    According to her, the global financial system and architecture have assumed a new dimension even before the new administration of Donald Trump in the United States of America.

    She said that globalisation had broken the limits of financial flows , and investors have inadvertently taken full advantage of the opportunities.

    “However, countries and their financial systems must be prepared to utilise opportunities created by financial globalisation through appropriate policy support and actions.

    “The Nigerian banking system has also undergone reforms, including recapitalisation and consolidation exercises.

    “The 2004 banking sector consolidation and recapitalisation exercise, which set a limit of N25 billion minimum capital base for banks, brought the Nigerian banks from 89 to 25,” she said.

    She said that as the country worked towards building a one-trillion dollar economy, it must consider recapitalisation of its banks to be able to finance the economy and favourably compete globally with its peers.

    “We should particularly pay significant attention to bank recapitalisation to ensure that our banks are strong, resilient and stable enough to carry our financial intermediation.

    “Building a one-trillion dollar economy is not as easy task. It will require careful planning, robust and clear policy direction, dutiful implementation and averred commitment from stakeholders that would galvanise various sectors of the economy.

    “Today, our economy is valued at approximately 25 billion dollars. As we aspire to build a trillion-dollar economy, all hands must be on deck, ” she said.

  • CBN told to ensure smooth recapitalisation process for banks

    CBN told to ensure smooth recapitalisation process for banks

    The Centre for the Promotion of Private Enterprise (CPPE) has advised the Central Bank of Nigeria (CBN) to minimise shocks and disruptions in the banking system and economy during the recapitalisation period.

    Dr Muda Yusuf, Founder, CPPE made the call on Monday in a statement in Lagos.

    CBN had on Thursday raised minimum capital requirement for commercial banks with regional, national and international licences to ₦50 billion, ₦200 billion and ₦500 billion respectively.

    CBN also raised the capital base of merchant banks with national licences to ₦50 billion while it increased that of non-interest banks with regional licences to ₦10 billion and ₦20 billion for those with national licences.

    Yusuf commended the CBN for giving a timeline of 24 months deadline to ensure smooth transition to the new capitalisation regime for banks.

    “The proposed recapitalisation of banks should be done in a manner that would minimize shocks and disruptions to the banking system and the economy at large.

    “We commend the CBN for giving a timeline of 24 months for banks to comply,” he said.

    He commended the CBN on the categorisation of the lenders with differential capital requirements to allow for inclusion and reduce the risk of dominance of the banking space by a few big banks.

    The CPPE boss urged the CBN to assure depositors of the safety of their funds in the banking system, irrespective of the current level of capitalisations of banks.

    According to him, it is important to sustain the confidence of the banking public about the soundness and stability of the Nigerian banking system, especially because of the perception and vulnerable risks of smaller banks.

    He also urged the apex bank to ensure minimum risk to shareholders and employees in the banking system across board.

    “It is also imperative to guide against elevated concentration risks and the deepening of oligopolistic structure in the banking system. There are also concerns around the large interest rate spreads in the Nigeria banking system.

    “Spread between deposits and lending rates are sometimes as high as 20 per cent, which is one of the highest globally. The tenure of funds in the banking system is extremely short.

    “Over 80 per cent of funds are of one year tenure or less, which explains the high level of assets and liability tenure mismatch in the banking system. Access to credit by small businesses remains a major inhibition to economic growth and economic inclusion.

    “Small businesses account for over 50 per cent of GDP, but get less than five per cent of credit in the banking system. Financing gap in the Nigeria SME space is about $32.2 billion (over N40 trillion), according to IFC estimates.

    “De-risking the credit space for small businesses should be accorded high priority in the new dispensation. This is essential to boost growth, create jobs and deepen economic inclusion.

    “The apex bank should caution all players in the banking sector against predatory and other anti-competitive practices in the industry on account of the recapitalisation policy,” he added.

    The CPPE boss who is an economist explained the implications of the capitalisation aimed at ensuring efficiency and stability of the financial system.

    According to Yusuf, the real issue is that inflation had weakened the value of money overtime which makes recapitalisation imperative and inevitable.

    “The essence is to ensure the safety of depositors’ fund, strengthen the stability of the financial system, deepen resilience of the banking system and reposition the bank to support growth,” Yusuf said.

    Accorsing to him, Nigerian banks are sound and healthy but that does not eliminate the need for regulatory authority to ensure that the soundness and stability are preserved and improved upon.

  • NAICOM approves recapitalisation plans of 44 firms

    The National Insurance Commission ( NAICOM) on Tuesday in Lagos granted no objection to 44 insurance companies to proceed with their recapitalisation plan.

    Its Acting Commissioner, Mr. Olorundare Thomas who spoke during an interactive session with shareholders said two companies have concluded plans to merge.

    Represented by the Director, Policy and Regulation Directorate, Mr.Pius Agboola, he said 10 insurance firms are yet to get the no objection approval to continue with their recapitslisation plans.

    Out of the 10 yet to be approved by the Commission, two have not submitted, another two have their plans under review while six were turned back by the regulator for rework.

    With nearly N200 billion expected in the insurance industry after the recapitalisation, the sector is hopeful to emerge stronger, contribute more to the economy and offer good returns to investors.

    With the new capital, the industry will have enough resources to attract quality manpower, acquire necessary skills to underwrite big ticket risks, increase retention in the local market, and be able to take advantage of untapped potentials to create shareholder value.

    NAICOM had in a circular issued on Monday May 20, 2019 announced increase in the paid-up share capital of life companies from N2 billion to N8 billion; General Business from N3 billion to N10 billion; Composite Business from N5 billion to N18 billion; and Reinsurance Companies from N10 billion to N20 billion.

  • NAICOM receives recapitalisation plans from 49 firms

    The National Insurance Commission (NAICOM) has received the recapitalisation plans of 47 insurers and two reinsurers.

    This is coming following the circular issued by the Commission directing the risk bearing companies to submit their recapitalisation plans by August 20, 2019.

    Head, Commissioner for Insurance’ Directorate, Rasaaq Salami, explained that the Commission, in keeping with the recapitalisation road map, has concluded review of the submissions of plans of insurers and reinsurers and have communicated individual companies on their positions.

    He said: “26 companies have been granted “No Objection” to proceed with their plans, and the plans of 17 companies were corrected and have been advised to resubmit their new plans using paid-up capital and not shareholders fund.”

    He further explained that four companies do not have the requisite 2018 financial statements and are thus, advised to review their plans of using Initial Public Offering (IPO) and one company has litigation issues and has been advised to resolve them as soon as possible to enable its progress.

    “One company’s submission was noted to have met the necessary requirements; the review of submissions from two companies is ongoing while three companies are yet to submit their recapitalisation plans,” he added.

    He therefore reassured all stakeholders of the Commission’s resolve to adhere to the recapitalisation roadmap towards achieving its desired objectives in their best interest.

     

  • Federal Mortgage Bank seeks N500bn recapitalisation fund

    Federal Mortgage Bank seeks N500bn recapitalisation fund

    Mr. Umar Dankane, Executive Director, Business Development and Portfolio Management of the Federal Mortgage Bank of Nigeria has said that the bank needs a N500 billion recapitalisation fund for optimal performance.

    Dankane disclosed on Wednesday in Calabar at the bank’s Southern Zonal Retreat, with the theme “Motivating the Informal Sector to Embrace the National Housing Fund Scheme.“

    According to him, for the mortgage market to excel in Nigeria, there is an urgent need for the Federal Government to recapitalise the bank with N500 billion.

    “The crucial challenge facing the Federal Mortgage Bank in Nigeria is its capital base. The bank is yearning for the government’s rescue through recapitalisation. Initially, the bank was created with a capital base of just N5 billion and been the famous secondary mortgage market, it can no longer hold from the realities on the ground” he explained.

    “Today, even the Primary Mortgage Bank has the capital base of N5 billion. “So you can imagine the famous Secondary Mortgage Market still relying on N5 billion capital base. It is against this background that when we came on board. We have to review the situation and called on the government that the bank needs to be recapitalised to the tune of N500 billion. I strongly believe that if this is done, the mortgage market will excel in Nigeria and the sky will be the limit” he added.

    Dankane said that the fund if provided, would help the bank to provide affordable houses for workers in the country and enhance access to such facilities.

    The executive director said that the bank was working at reducing the housing deficit in the country, by ensuring improvement in Nigeria’s housing stock. He said that the primary function of the bank was to provide affordable housing to workers, adding that the bank’s interest rate stood at 6 percent single digit.

    Dankane also said that the bank was working with developers and all relevant stakeholders in providing solutions to workers’ housing deficit. He said that the retreat was organised to harness ideas and proffer solutions on ways to improve on services and explore ways to market the National Housing Fund (NHF) scheme to prospective contributors.

  • Buhari approves proposed recapitalisation of insurance firms

    Buhari approves proposed recapitalisation of insurance firms

    President Muhammadu Buhari on Monday approved the National Insurance Commission (NAICOM’s) directive for the recapitalisation of the insurance firms. He urged the operators not to fight the policy.
    Represented by the Permanent Secretary, Federal Ministry of Finance, Dr Mahmud Isa-Dutse, spoke at the ongoing Insurance Industry Consultative Council’s 2019 National Insurance Conference at Transcorp Hilton Hotel, Abuja.
    He said with the recapitalization directive, it is expected that operators will be true to themselves and consider all regulation available for their continued existence.
    Buhari said insurance companies are facing many challenges in the current environment and as such, they should realise that market innovation and performance of duties such as creating good services and prompt delivery of those services to customers would facilitate the growth and development of the industry.
    He further said the Ministry of Finance will continue to collaborate with NAICOM and the industry to ensure that the target of about 40 per cent penetration rate at the end of year 2020 is achieved as contained in the 2018 revised Financial Inclusion Strategy.
    He said it is imperative to say that this is an industry target where all stakeholders will be expected to work in unison to attain.
    In this regard, he expects the various arms of the sector to support and work with the regulator to ensure the realisation of this and all set targets.
    Buhari said: “With the recapitalisation directive in the country, we expect operators to be true to themselves and consider all regulation available for their continued existence.
    “It should not include fighting the policy just because you cannot raise the required capital. Your industry should be more responsive to the economy. the industry can do more to contribute to the development of Nigerian economy, we can do more to
    “Insurance companies are now facing many challenges in the current constituted environment and as such realised that market innovation and their duty such as creating good services, prompt and delivery of those services to customers would facilitate the growth and development of the industry.
    “This administration is very excited about the recapitalisation and other reforms in the industry and asks the ministry to continue to closely monitor activities in the sector. The insurance industry issues regulations that all insurance companies must follow and this will cause them to understand and implement the new technologies and innovations that can help the sector. However, NAICOM must design ways to acknowledge changes to the existing businesses, considering that we live in a technological human age where technology enhances businesses for profit in the organisation.
    “We must also put in place strategies to mitigate and control such risks so that technology in the insurance sector can be fully realised.”
    Consequently, President Buhari raised four questions for operators at the conference to explore in order to start building the strategy for companies to adopt.
    He asked that to what extent can they use technology first of all to transform the goal structure of the business system; to what extent will it mitigate the disruption to satellite in the industry; to what extent will it give back to new value propositions and markets; and to what extent will building technology give back to the industry?
    “In possession of these question, also ponder on the Federal Government’s expectations of insurance companies which includes increased financial capability to enable local retention; prompt payment of claims; transparency in dealing with quotation policy holders to consumer consumer first; expansion in time consuming insurance policies to better address clients’ needs; increased numbers on outreach of specific sectors such as non-relevant segments; and expansion of the operations to cover the country.
    Commissioner for Insurance, Alhaji Mohammed Kari said from the regulatory standpoint, the need to exploit the opportunities of digitalisation and to tame the cumulative consequence of inflation and devaluation of the naira heightened the necessity for the ongoing reforms of the insurance industry. He said expansion of the insurance distribution channels, financial inclusion, corporate governance enforcement, market discipline, professionalism and the recapitalidation exercise were aimed at strengthening insurance institutions and increasing the spread of insurance in the country.
    These reforms are in furtherance of the Buhari administration’s determination to revamp the economy as encapsulated in the ERGP in order to ensure that the insurance industry becomes a significant contributor to economy of Nigeria, he added.

  • CBN sets April 2021 deadline for MfBs’ recapitalisation

    CBN sets April 2021 deadline for MfBs’ recapitalisation

    The Central Bank of Nigeria (CBN) yesterday set a three-year timeline for all categories of Microfinance Banks (MfBs) to recapitalise. The apex bank directed all categories of MfBs to complete their recapitalisation process on or before April 2021.

    In a circular to all MfBs signed by CBN Director, Financial Policy and Regulation, Kelvin Amugo, the CBN also approved N5 billion minimum capital base for National Microfinance Banks. The minimum capital bases for State Microfinance banks were set at N1 billion; Tier 1 Unit Microfinance Bank, N200 million and Tier 2 Unit Microfinance bank N50 million.

    Amugo said the apex bank revised the categories of Microfinance banks with a view to ensuring continued operations of Microfinance banks in the rural, unbanked and underbanked areas of the economy.

    “Accordingly, Unit Microfinance Banks shall comprise of two tiers: Tier 1 Unit Microfinance bank, which shall operate in the urban and high-density-banked areas of the society; and tier 2 Unit Microfinance Bank, which shall operate only in the rural, unbanked or underbanked areas,” Amugo said.

    He explained that to aid the process of recapitalization, all Tier 1 Unit Microfinance banks shall meet a N100 million capital threshold by April 2020 and N200 million by 2021; Tier 2 Unit Microfinance Banks shall meet a N35 million capital threshold by April 2020 and N50 million by April 2021; State Microfinance bank shall increase its capital to N500 million by April 2020 and N1 billion by April 2021 while National Microfinance Bank shall hold a capital of N3.5 billion by April 2020 and N5 billion by April 2021.

    The CBN had earlier announced its plans to set up National Microfinance Bank backed by the Nigeria Postal Services (NIPOST) to enable it drive financial inclusion to the people living in rural communities.

    It is also hoped that the bank would help to fill the vacuum in extending credit to small and medium enterprises as private Microfinance banks had failed to fulfill the promise of financial intermediation to lower segments of the society.

  • NAICOM suspends recapitalisation of Insurance Firms

    The implementation of Tier-based Minimum Solvency Capital policy for insurance companies operating in Nigeria has been suspended by the industry’s regulator, National Insurance Commission (NAICOM).

    This information was made known by NAICOM in a circular to all insurance institutions titled Update on the implementation of the Tier-based Minimum Solvency Capital policy for insurance companies in Nigeria.
    The policy, also known as the recapitalisation of the industry, put insurance firms into three categories based on their capital base.
    Tier 1 insurance companies are required to have minimum capital base of N9 billion for general insurance and N6 billion for life insurance, implying a composite capital base of N15 billion.
    Tier 2 companies are divided into two categories, with N4.5 billion minimum capital base for general insurance and N3 billion for life assurance. Thus a composite insurance-general and life insurance, will be required to have minimum capital base of N7.5 billion.
    Tier 3 companies will continue to operate on the existing minimum capital base of N3 billion for general insurance and N2 billion for life insurance, implying a composite capital base of N5 billion for a composite tier 3 insurance company.
    Under the risk-based capitalisation approach, tier 1 companies will be able to undertake all risks including annuity and high-level special risks such as energy and aviation risks. Tier 2 companies will undertake retail insurance as prescribed under Tier 1, including commercial and industrial risks and group life assurance while tier 3 companies will only be able to write retail insurance only including micro insurance, motor, fire, agriculture, compulsory liability insurances, individual life, health and miscellaneous insurance.
    The new scheme was to take effect this month, but the regulatory agency has asked insurance companies to continue with the subsisting regulatory framework prior to the circular.
    This, NAICOM explained, was due to a court order directing the regulator to suspend implementation of the policy.
    Some stakeholders in the sector had approached the court to halt the scheme, claiming the timing was not right.
    Justice Muslim Hassan had in September 2018, gave the order in a class action brought by the shareholders restraining NAICOM from enforcing the TBMSC policy, pending the expiration of the 30-day pre-action notice dated September 4, 2018.
    In the circular, NAICOM said. “In compliance with the extant rules and injunction issued by the Federal High Court regarding the tier-based minimum solvency capital framework, which was to take effect from October 1, 2018, the commission wishes to clarify that the status quo will be maintained and insurers are to continue to operate on the subsisting regulatory framework prior to the circular.”