Sound regulatory oversight keeps banking sector strong —Cardoso

Sound regulatory oversight keeps banking sector strong —Cardoso 

THE Nigerian banking sector has demonstrated remarkable resilience and stability, thanks to the effective regulatory oversight provided by the Central Bank of Nigeria (CBN) and other relevant authorities, according to a recent assertion by the CBN governor, Olayemi Cardoso. 

By maintaining a robust regulatory framework, the authorities have been able to mitigate potential risks, ensure compliance with international best practices, and foster a stable environment conducive to growth and development in the banking sector.

In the personal statement of the Monetary Policy Committee (MPC) released last week, Cardoso stated, “The banking sector remains strong, underpinned by sound regulatory oversight. The ongoing recapitalization process is a key priority for strengthening financial institutions against external shocks by injecting high-quality capital.

“The MPC has reaffirmed its commitment to closely monitoring this process to safeguard financial stability and maintain public confidence in the sector.”

According to him, in reviewing these economic conditions, the arguments for further monetary tightening against the commencement of a policy easing or maintaining the current stance were carefully weighed

While an increase in the policy rate could help further tighten liquidity conditions, reinforce exchange rate stability, and attract foreign investment, recent indicators suggest that inflationary pressures are beginning to ease in response to prior rate hikes.

“The easing of rates, on the back of an observed deceleration in inflation, also appears premature, given the fragility of the current environment and persisting risks on the horizon that may induce a reversal of all the gains recorded thus far.

There is also a need to observe more data points on the revised CPI numbers to allow for further interrogation of the expected behaviour of prices in the rebased consumption basket, as well as to validate staff inflation forecasts and model estimates, “ the governor noted.

Moreover, global uncertainties, including geopolitical risks and restrictive policies by major central banks, necessitate a cautious approach. These considerations led me to align with the consensus of the Committee in maintaining all policy parameters unchanged, a prudent decision aimed at preserving stability and fostering long-term economic growth.

Available records show that the Capital Adequacy Ratio (CAR) rose to 14.84 percent at the end of January 2025, up from 10.70% in January 2024. The increase in CAR reflects positive movement in the capital strength of Nigerian banks, indicating that banks have either raised more capital, improved profitability, or reduced risky assets, thereby enhancing their ability to absorb shocks. While this improvement is positive, 14.84 percent remains below the regulatory threshold for many banks in the advanced economies, thus leaving room for further improvement to meet international standards and cope with external financial pressures. I therefore call for additional action to accelerate the recapitalization process.