C&I Leasing: Effective recapitalisation to boost GDP, productivity

The banking sector in Nigeria is currently facing a race against time to meet new recapitalisation requirements set by the Central Bank of Nigeria (CBN). The Group Managing Director of CNI Leasing, Lennon Ogoji, believes that a successful recapitalisation exercise could have a positive impact on the country's productivity, GDP growth trajectory, and overall living standards. In a recent interview, Ogoji highlighted the challenges and opportunities that Nigerian banks are facing as they seek to raise capital to meet the new requirements. The recapitalisation targets set by the CBN require banks to raise capital by ten times more than the current industry minimums. Tier 1 banks like Access and FBNH have already received shareholder approval to embark on capital-raising programmes. Ogoji mentioned that despite the hurdles, such as the high opportunity cost of investing in a market with high government securities rates, there is some confidence in the banking industry. He believes that the industry's track record, both in Nigeria and across Africa, could instill positive sentiments among investors. One of the key options available to banks for raising capital is through rights issues, which has been the preferred choice so far. Ogoji emphasized that strengthening their capital through rights issues could better position banks for potential mergers and acquisitions in the future. By consolidating their position now, banks can negotiate from a position of strength when considering combinations in the industry. Ogoji sees this strategic move as a smart play by banks with a strong shareholder base. The need for recapitalisation in the banking industry is rooted in broader economic goals, including the ambition to build a $1 trillion economy in Nigeria. However, recent challenges, particularly in foreign exchange, have impacted growth projections, pushing the country down the rankings in Africa's economy. Ogoji highlighted the significant infrastructure deficit in Nigeria as an opportunity for growth, emphasizing the importance of long-term capital for achieving ambitious policy objectives. Stronger banks, supported by smart government policies and key industry players, will be essential in bridging the infrastructure gap and driving economic progress. Despite the challenges posed by volatile interest rates and inflationary pressures, Ogoji remains cautiously optimistic about the ongoing reforms and their potential impact. He stressed the need for coherent steps and a clear policy direction to attract private sector investment and build confidence in the economy. Positive developments in sectors like marine contracts are seen as green shoots that indicate progress towards a more stable and investor-friendly environment. As the Nigerian banking sector navigates the path to recapitalisation, stakeholders are closely monitoring the reforms and their implications for the broader economy. With the right strategies in place, the banking industry could play a crucial role in propelling Nigeria towards its economic goals and fostering sustainable growth for the future.