The International Monetary Fund (IMF) says recapitalisation will strengthen the resilience and capacity of banks in Nigeria, especially in view of systemic vulnerabilities in the banking sector.
After its recent mission to Nigeria, the IMF team issued the following statement:
“Banking system vulnerabilities should continue to be addressed. The mission welcomed recent efforts to reduce legacy non-performing loans. The introduction of risk-based minimum capital requirements would also help strengthen bank resilience. Notwithstanding the significant increase in lending, concerns about shortened maturity, asset quality and conflicting monetary policy signals call for revisiting the minimum lending to deposit ratio directive.
Further tightening of monetary policy—albeit through more conventional methods—is needed to contain domestic and external pressures arising from large amounts of maturing CBN bills. The mission reiterated its advice on ending direct central bank interventions, securitizing overdrafts to introduce longer-term government instruments to mop up excess liquidity and moving towards a uniform and more flexible exchange rate. Removing restrictions on access to foreign exchange for the 42 categories of imported goods would be needed to encourage long-term investment.
On border closure, the IMF said: “Nigeria’s border closure will continue to have significant economic consequences on the country’s neighbors. It is important that all involved parties quickly resolve the issues keeping the borders closed—including to stop the smuggling of banned products.”