The Central Bank of Nigeria (CBN) led by Olayemi Cardoso has been warned against repeating the mistakes made by the former governor, Chukwuma Soludo during the 2005 banking sector capitalisation which led to unhealthy mergers and acquisitions.

Prof Segun Ajibola, the former President of the Chartered Institute of Bankers of Nigeria (CIBN) gave the advice on Tuesday while suggesting a healthy means of conducting bank recapitalisation

This was in reaction to plans to direct Nigerian banks to commence capital increase under new regime being prepared by the Central Bank as part of efforts to build a $1trn economy.

The former CIBN boss said there is a positive correlation between the state of the banking industry and the state of the economy.

Ajibola said, “One of the things that defines the health of the banking system is the strength of the capitalisation of the industry. As of the time the last capitalistion was carried out, the value of the dollar was just a bit over N100 compared to with about N800 that we have today. In terms of real value, there has been erosion in the level of capitalisation of banks, therefore calling for a revisit of the adequacy of the capitalisation level as we have it today.

“Dr. Olayemi Cardoso said that the time is due to revisit the recapitalisation, and he was silent about what figure. He was silent about the timeframe, which will be the details later.

“Let me step back a bit to where we got things wrong in 2005, which some of us pointed out then. N25bn was imposed as a minimum capital base for all banks by (Chukwuma Soludo), it was absolutely unnecessary to make such a pronouncement that it would create a sense of equality among banks

“It was six years after in 2011 that it was revisited by the succeeding CBN Governor (Sanusi Lamido Sanusi), and we now have three levels international, national, and regional with different levels of capitalisation.

“But before then, the 2005 exercise created a lot of problems- unholy alliances, marriages of inconveniences, pollution of corporate culture, some fine brands were lost, some good customers had problems, some shareholders lost out and the economy did not benefit eventually as we saw in 2009 crisis.”

After Sanusi regrouped banking capitalisation in 2011, the minimum paid-up share capital to be maintained for a national level banking license was retained at N25bn while N10bn was set for a Regional Banking License and International Commercial Banking License increased to N50bn.

Prof Ajibola said Cardoso must follow specific rules like stakeholders’ engagement, enough timeframe, and clearly defined capital levels in order to achieve the desired result.

According to him, for the banking industry to key into the passion of the Bola Tinubu-led government, the CBN must get the commitment of stakeholders like the Committee of Banks Chief Executive Officers, CIBN among others.

He said in 2005, the CBN pronounced N25bn “There was no question and answer, no contribution from any of the stakeholders and the banks just went back running into so many kinds of merger and acquisition and at the end of the day the industry was never better.”

He said banking sector recapitalisation is due in Nigeria. However, “the process that led to certain unintended consequences in 2005” should be avoided by Cardoso.

Prof Ajibola added, “We are saying that now that we are thinking of another exercise, let us avoid the mistakes of the past. Let us do it in the finest of manner so that the benefits accruable from such a recapitalisation will be available to the country, which should be the case.”