Parthian Partners Optimistic On Banking Recapitalization Exercise
The Chief Finance Officer (CFO) of Parthian Partners, Mr. Olayinka Arewa has said that the ongoing banking recapitalization would be successful.
Arewa stated this at the annual workshop of Finance Correspondents Association of Nigeria (FICAN) held at the weekend in Lagos with the theme, ‘Nigeria’s Journey Towards $1trillion Economy: Impact of Banks’ Re-Capitalization, Opportunities for Fintechs, Real Sector’.
In the new Central Bank of Nigeria (CBN) capital requirement, international banks are expected to raise their capital base to N500 billion, national banks, N200 billion and regional banks N50 billion. The purpose of this is to strengthen the banks and position them to play pivotal roles in driving development across all sectors of the economy. The CBN is also seeking to ensure the emergence of stronger, healthier and more resilient banks to support the achievement of a $1 trillion economy by 2030 and promote financial stability.
Arewa, representing the Managing Director/CEO of Parthian Partners, Mr. Oluseye Olusoga noted that “we are very optimistic on the successful outcome of the exercise. We have done it before with the 2004 banking recapitalization.”
He noted that in 2004, Nigeria had 89 banks and a fragmented industry with minimum capital base of N2 billion, translating to about $250 million dollars back then.
“Then somebody came up and said, we can build a world-class institution that can survive shocks with a longer-term perspective of the industry. The exercise which lasted for 18 months created uncertainties; despite all the odds, we got it right,” he said.
Arewa, noted that “with today industry outlook, we have banks that compete favourably in spaces; that were hitherto unimaginable. We have banks that operate internationally. This was not so in 2004.
“In 2004, public sector funds were pulled out systematically from the banks. Banks were made to go after deposits, and that was how retail banking grew. With today advancement in technology, and in terms of consumer appetite, the current exercise will be successful.”
He declared, “I did a comparison between 2004 and 2024 banking recapitalization. The minimum benchmark that was set in 2004 was about using the dollars as a benchmark of $250 million minimum. Now, translating what we have today, plus or minus the exchange rate, it comes to about $300 million. So, we are pretty much on the same platform. But we have something different. Back then, it was a flat-out N25 billion”.
He noted that “over the last 15 years, we have created a kind of tier system of banking, and we can absorb it.”
“Let us not forget, that we have a youthful population, with the average age in the Nigerian population today being 19 years. That means we have more youth than the older generation. So, the appetite has changed. Even if we did not want to change, we would have been forced to change.”
According to him, we have tiers of banks, tiers of microfinance banks, tiers of fintechs. With this recapitalization that has started, I am hopeful, as a country, that what happened in 2004 gave us institutional capacity.
Also, the National Chairman of FICAN, Mr. Chima Titus Nwokoji said that Nigeria’s ambition to become a $1 trillion economy by 2025 or 2026 requires bold reforms.
He noted that “this is critical especially now that the country has been ranked the number four biggest economy in Africa by the International Monetary Fund (IMF). A critical step in the recapitalization of banks is the enhancing of their capacity for financial intermediation, to support fintechs and the real sector.
“Already, there are estimates that the recapitalization of these banks will bring in about N3.3 trillion into the banking system. This comes with its multiplier effects on the economy.”
