Foreign Investment Surge Linked to Bank Recapitalisation, Says CBN Governor
Thank you for reading this post, don't forget to subscribe!Olayemi Cardoso, Governor of the Central Bank of Nigeria (CBN), attributed the increase in foreign investments to the bank recapitalisation programme recently implemented by the apex bank. Speaking at an event in Abuja on Wednesday, Cardoso, represented by John Simeon Onoja, Acting Director of Financial Policy and Regulations, highlighted that the rise in foreign direct investments is reflected in the country’s growing foreign exchange earnings.
Cardoso emphasized that the recapitalisation aims to enhance banks’ liquidity, enabling them to lend more effectively to key sectors. He noted that this increased liquidity is already resulting in higher foreign investments, with banks seeing a positive impact on forex inflows.
To meet recapitalisation requirements, banks have started issuing new shares, public offers, rights issues, private placements, and engaging in mergers and acquisitions. Banks unable to meet the new capital thresholds may opt to downgrade.
According to the National Bureau of Statistics (NBS), foreign investments in Nigeria surged to $3.38 billion in the first quarter of 2024, up from $1.09 billion in the previous quarter, with portfolio investments making up $2.08 billion of the total.
Cardoso added that the CBN conducts stress tests to ensure financial institutions can withstand economic shocks, and efforts are underway to enforce stringent criteria for new shareholders to prevent illicit funds from entering the system.
The CBN’s new minimum capital requirements, announced in March 2024, set the minimum base for international banks at N500 billion. Afrinvest’s 2024 report reveals that several major banks need to raise additional capital to meet this requirement. Ike Chioke, CEO of Afrinvest Group, indicated that the sector might see mergers, acquisitions, and potential downgrades as part of the adjustment process. He also stressed the need for comprehensive economic growth to reach Nigeria’s $1 trillion economy goal.I’m
