SEC DG says bank recapitalisation, others key to trillion-dollar economy

The Director-General of the Securities and Exchange Commission (SEC), Dr Emomotimi Agama, says addressing critical sectors and leveraging a recapitalised banking sector are essential for Nigeria to unlock its potential and achieve a trillion-dollar economy.

A statement made available by the commission on Monday in Lagos, quoted Agama to have stated this at a forum on steps towards ongoing banks recapitalisation held over the weekend.

The director-general said the nation needs to diversify the economy beyond oil exports, invest in infrastructure, human capital and innovation.

He said that the country must also enhance the business environment, reduce regulatory hurdles, promote financial inclusion and access to credit for SMEs, and individuals.

“Bank recapitalisation refers to the process of increasing a bank’s capital to meet regulatory requirements, improve financial stability, and enhance lending capacity.

“The recapitalisation can indeed play a significant role in catalysing a trillion-dollar economy through the capital market.

“The capital market plays a crucial role in this process by providing banks with access to various financing options, such as: Equity financing, which allows banks to issue new shares to raise capital from investors.

“Debt financing allows banks to issue bonds or other debt securities to raise capital from investors and rights issues which permits existing shareholders to purchase additional shares at a discounted price,”he said.

According to him, recapitalisation through the capital market can help banks meet regulatory capital requirements, improve capital adequacy ratios, increase lending capacity, enhance financial stability, restore investor confidence, enhanced investor confidence and better risk management.

The SEC boss noted that a recapitalised banking sector can lead to increase lending to key sectors like agriculture, manufacturing, and infrastructure.

Agama said that bank recapitalisation would also drive economic growth, enhance its ability to underwrite large-ticket transactions, support big projects and industries, as well as attract foreign investors, boost capital inflows and deepen the capital market.

He added that recapitalisation could also encourage listing of banks and other companies on the Nigerian Exchange Ltd. (NGX), increasing market capitalisation and fostering a stable financial system.

He said that this would reduce systemic risk and promote economic stability, as the Nigerian Exchange platform, designed to streamline public offerings and rights issues in the market is a viable channel for boosting investments.

Agama further said the NGX would assist in the attainment of a better economy.

The SEC boss revealed that recapitalisation can also have challenges, which includes share price dilution, increased debt servicing and regulatory hurdles among others.

He said that SEC recently released a framework which aims to ensure a smooth, transparent, and efficient capital-raising process for banks and holding companies participating in the recapitalisation programme.

Agama explained that the framework outlines the guidelines and procedures that banks are required to follow to raise capital through rights issuance, private placements, or other approved methods during the year 2024-2026 recapitalisation period.

He urged commercial banks to expedite actions in increasing their capital base as directed by the CBN to strengthen the financial system against potential risk.