Banking Sector Faces Overhaul as CEOs Engage in Merger, Acquisition Talks Amid Fresh Recapitalization Push

Banking Sector Faces Overhaul as CEOs Engage in Merger, Acquisition Talks Amid Fresh Recapitalization Push

In response to the recent directive from the Governor of the Central Bank of Nigeria, Dr. Olayemi Cardoso, chief executive officers and top executives of Deposit Money Banks (DMBs) have initiated discussions to raise fresh capital and explore potential mergers and acquisitions.

According to sources within the banking industry, preliminary talks for mergers and acquisitions are underway, with larger banks eyeing weaker counterparts for possible acquisition. Simultaneously, some middle-strength and weaker banks are seeking alliances that could result in mergers.

Governor Cardoso, speaking at the 58th Annual Dinner of the Chartered Institute of Bankers of Nigeria, emphasized the need for banks to bolster their capital base to support the ambitious goal of achieving a $1 trillion economy set by President Bola Tinubu over the next seven years.

In response to the directive, a CEO of a Tier-1 lender expressed readiness to raise fresh capital, aligning with the central bank’s initiative. Several banks, including First Bank of Nigeria Holdings, Wema Bank, Jaiz Bank, and Fidelity Bank, have proposed rights issues or announced plans to raise additional capital.

While some banking executives welcomed the recapitalization policy, others acknowledged potential challenges, citing the current economic state. An executive director from a regional bank revealed plans to engage in merger talks and indicated that discussions would accelerate once the Central Bank releases guidelines for the new capital base.

Rasheed Bolarinwa, President of the Association of Corporate and Marketing Communications Professionals in Banks, cautioned the public to await the formal unveiling of the recapitalization plan for detailed information.

Experts, including Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise, and Professor Uche Uwaleke, emphasized the importance of incentivizing banks rather than coercing them into recapitalization. They suggested using prudential guidelines and differential cash reserve requirements to strengthen the banking sector.

However, concerns were raised about the potential negative impact of recapitalization, with economists warning of possible mergers and acquisitions leading to unemployment and economic uncertainty. Some experts advocated for a balanced approach, urging the Central Bank to carefully consider the unintended consequences of its policies.

In response to criticisms, Governor Cardoso highlighted the need for a resilient banking industry to support the nation’s economic growth. He emphasized the positive effects of recent government policies, such as the removal of the petrol subsidy and the adoption of a floating exchange rate, on the stability of the local economy.

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