An economist, Johnson Chukwu, has stressed the need for the Central Bank of Nigeria (CBN) to deploy available infrastructure technology and Bank Verification Numbers (BVN) to speed up the verification of offers in the capital market.
Irked by the delay in the verification process, which has continued to raise concerns among investors, especially as the authority has not been able to conclude any verification almost four months after the closure of some offers, Chukwu said the deployment of IT and BVN would help fast track the process of accepting or rejecting offers and enabling investors get their allotments.
Speaking at the yearly workshop of the Capital Market Correspondents Association of Nigeria held in Lagos at the weekend, he argued that while the CBN’s role in verifying the source of the capital invested is important, the long period for completion of the verification process is dampening investors’ confidence.
According to him, this is particularly worrisome for investors whose funds may be returned where the offers may be oversubscribed given the missed reinvestment opportunities.
Chukwu also stated that the current CBN requirements for investors investing in bank shares are seen by many as stringent and creating barriers for both issuers and investors.
He cited the provision of three-year audited financial statements, board resolution authoring the investment and tax clearance certificates for the past three years for corporate investors, noting that these requirements are disincentive to investment in the capital market.
He added that while regulation is necessary for maintaining the stability and integrity of the financial system in ensuring that unqualified capital is not invested in the banks, there is a need to leverage existing customer information in the banking system to avoid imposing onerous conditions on investors.
Chukwu, who is also the Chief Executive Officer of Cowry Asset Management Limited, described banks’ recapitalisation as a key strategy for strengthening the Nigerian banking sector and fostering economic growth.
However, he argued that the success of these efforts hinges on effectively bridging the gap between investors and issuers in the capital market.
Outlining the role of the capital market in the recapitalisation exercise, Chukwu noted that when banks access the capital market and demonstrate their ability to raise capital through successful IPOs, rights issues and bonds, it strengthens investors’ confidence and sends a positive signal to the broader financial market.
This is because a well-capitalized bank is perceived as financially stable, reducing risk for investors and enhancing market confidence. Chukwu added that this encourages further investment in the banking sector, which is essential for the sustainable growth of the industry.
Therefore, he called for concerted efforts from both banks and investors, supported by regulators to ensure that the Nigerian banking sector remains resilient, competitive, and capable of driving the country’s economic growth for the future.
He also urged the CBN and other regulatory bodies to work together to create a more predictable regulatory environment for banks and investors.
“The frequency of regulatory policy changes needs to be moderated to allow for better planning for both banks and the investing public as well as reduce the regulatory and operational risks associated with these frequent changes.
Source: Guardian
