Johnson Chukwu, Group Managing Director of Cowry Assets Management Limited, has called on the Central Bank of Nigeria (CBN) to expedite the ongoing recapitalisation process for Nigerian banks by utilizing available technology and the Bank Verification Number (BVN) system.

Chukwu made this appeal at the Capital Market Correspondents Association of Nigeria’s annual workshop, themed ‘Banks’ Recapitalisation: Bridging the Gap Between Investors and Issuers in the Nigerian Capital Market,’ which took place in Lagos.

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The Need for Speed in Verification

The CBN’s recapitalisation directive has prompted several banks to raise funds through public offers and rights issues. However, these offers remain unresolved months after being initiated due to the CBN’s verification process. Chukwu expressed concern over the delays and emphasized that there are technologies available, including the use of BVN, that can accelerate this verification and allow for quicker decision-making regarding offers.

He argued that while the CBN’s verification of the source of capital is crucial, the prolonged process is damaging to investor confidence, particularly when funds are returned in cases of oversubscription. He pointed out the missed reinvestment opportunities for investors who face delays in receiving their allotments.

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CBN’s Stringent Requirements and Their Impact

Chukwu also critiqued the current CBN requirements for investing in bank shares, describing them as overly stringent and creating barriers for both investors and issuers. These requirements include three years of audited financial statements, a board resolution authorizing the investment, and three years of tax clearance certificates for corporate investors. Chukwu noted that these demands act as disincentives to capital market investment, making it more challenging for both parties to engage in the recapitalisation process.

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The Importance of Bank Recapitalisation

Despite these challenges, Chukwu highlighted the critical importance of the recapitalisation exercise for strengthening the Nigerian banking sector and fostering broader economic growth. He asserted that the success of these efforts is directly tied to bridging the gap between investors and issuers in the capital market.

Chukwu emphasized that when banks demonstrate their ability to raise capital through successful IPOs, rights issues, and bonds, they inspire greater investor confidence. This confidence, he argued, has the potential to create a more stable and prosperous financial environment.

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Call for Regulatory Cooperation and Stability

To facilitate this process, Chukwu urged the CBN and other regulatory bodies to collaborate in creating a predictable regulatory environment for both banks and investors. He stressed the importance of reducing the frequency of regulatory changes, which would allow for better long-term planning and help mitigate risks for both banks and investors.

Chukwu also called on banks to improve transparency by publishing detailed financial statements, risk disclosures, and forward-looking guidance. By tackling information asymmetry, regulatory uncertainty, and liquidity challenges, while enhancing corporate governance and financial innovation, Chukwu believes the Nigerian capital market can unlock new opportunities for successful bank recapitalisation.