The Centre for the Promotion of Private Enterprise has urged the newly appointed Central Bank of Nigeria Governor, Olayemi Cardoso, to make a top priority of resolving the backlog of forex obligations.
This request was conveyed through a press release titled “Ten Point Agenda For The CBN Governor,” issued by the non-governmental organization over the weekend.
Muda Yusuf, the Managing Director of CPPE, who signed the statement, said that the clearance of the backlog of forex obligations should be accorded high priority to restore the confidence of domestic and foreign investors.
He called on Cardoso to implement policies that enhance engagement with stakeholders and improve the efficiency of the financial system.
In light of the recent decline in the value of the naira against the U.S. dollar, which reached an all-time low of N995, Yusuf proposed that the new CBN management consider establishing an independent currency exchange window within the banking system, where currency trading can occur freely without restrictions.
This move aims to discourage remittance sales in the street FX market, often referred to as the black market.
Yusuf also highlighted the need to strengthen the financial intermediation role of deposit money banks, which is their primary function in an economy and pointed out that access to credit for the private sector remains challenging, particularly for small businesses.
To address this issue, he suggested promoting synergy and collaboration between the banking system and economic players, especially micro, small, and medium-sized enterprises (MSMEs).
Yusuf also called for attention to the efficiency of the financial system, specifically the significant gap between deposit and lending rates in the Nigerian banking sector, which indicates efficiency problems.
In Nigeria, this spread exceeds 20 percent, one of the highest globally, whereas the average for sub-Saharan countries is 10 percent and the global average is around 6.6 percent. This wide spread discourages investment and savings.
Yusuf further called for the new CBN governor to ensure the recapitalisation of banks.
“During the banking consolidation exercise of 2004, the minimum capital requirements for banks were raised from N2 billion to N25 billion. The revised capital requirement was an equivalent of $187 million.
“Today, the same N25 billion is equivalent to just $32.5 million. This is a clear indication of the phenomenal erosion of the capital base of the banks.
“Recapitalisation of the banks has therefore become imperative. It is important to ensure that the capital base of banks can support their current exposures in the interest of the financial system’s stability.”