Re: Recapitalisation without transformation is a risk Nigeria cannot afford
By Oduche Azih
The article, “Recapitalisation without transformation is a risk Nigeria cannot afford,” by Blaise Udunze, which was published on March 16, 2026, made interesting reading and deserves some comments.
There are so many nuggets here. I will select just a few for illustration.
“Past recapitalisation cycles revealed troubling practices, whereby funds raised through related-party transactions, borrowed money disguised as equity, or complex financial arrangements that recycled risks back into the banking system. If such practices resurface, recapitalisation becomes little more than an accounting exercise.”
I just wonder about the involvement of the likes of Chief Dr. Oba Otudeko, Femi Otedola and Olabisi Onasanya in the current restructuring (?), recapitalisation exercise. We remember the Union Bank, Jaiz Bank and of course Heritage Bank, Intercontinental Bank among other episodes. Nigeria’s regulatory authorities have simply not been serious. It’s been all about state capture. Everything else would be added on to you, right?
Udunze wrote, “every naira raised (should?) represent genuine, loss-absorbing capital.”
Hahaha!
Who wants that? When the system wins, they win.
Then when the system for whatever reason loses, they still win!
That’s not banking.
It has been akin to running a casino. And the Nigerian banking crowd, supported by a parade of complicit CBN Governors has aided and abetted such outcomes.
“In financial systems, credibility is itself a form of capital. If there is one recurring factor behind banking crises in Nigeria, it is corporate governance failure.”
“Nigeria’s banking system has long been characterised by excessive concentration in a few sectors and corporate clients, which calls for adequate monitoring and the need to be addressed quickly for the recapitalisation drive to yield maximum results.
“Growth in most advanced economies comes from the (very many) small and medium-sized enterprises that are well-funded.”
I easily recall our experience at Interlinked Technologies Plc (now Eunisell Interlinked Plc) in the hands of African International Bank, AIB and the then Diamond Bank in our breakout effort to pioneer the manufacturing of Insulators and other vital electrical components for power distribution. The manner that they treated us, we might as well not have even existed. Mind you, these two are not the only guilty ones. I look forward to the current management and surviving legacy directors finding the motivation to tell some of these stories in their own words.
“The concentration of huge loans to large oil and gas companies, government-related entities, and major conglomerates absorbs a disproportionate share of bank lending. This has continued to pose a major threat to the system, as the case is with small and medium-sized enterprises, the backbone of job creation, which remain chronically underfinanced. This imbalance weakens the economy.”
This does not require further elaboration. I have already made the case above. And so have many others.
And now the crime de la crime!
“Investing their funds into the government’s securities”
Why then would any big bank want to do wide dispersal lending to many small organizations and diligently do the necessary time and manpower resource consuming handholding? Against the backdrop of such nonchalance, I was surprised to follow the involvement of Ladi Balogun and FCMB Plc. in the developments at Tomato Jos right there in the killing fields of Kaduna State bordering the Jos Plateau of Plateau State. Such stories are so rare if I may say so. I commend FCMB on this single outlier. I am sure that there are other outliers. The problem is that they are too few and far between.
“Bigger banks that remain narrowly exposed do not strengthen the economy. They amplify its fragilities.
“Public confidence in the banking system depends heavily on credible financial reporting.”
I hope that the practitioners are listening.
“Job losses, casualisation, and declining staff morale can weaken institutional culture and productivity. Strong banks are built by strong people.”
We already know that “Nigeria’s largest banks already control a significant share of industry assets. Further consolidation could deepen the divide between dominant institutions and smaller players. This creates the risk of ‘too-big-to-fail’ banks whose collapse could threaten the entire financial system.”
Anybody with a simple knowledge of what happened to century old Bear Stearns, Lehman Brothers and others would understand that in banking, the past does not assuredly determine the future. You must assiduously work for it.
Udunze had added, “To address this risk, regulators must strengthen resolution frameworks that allow distressed banks to fail without triggering systemic panic, their collapse does not damage the whole financial system, and does not require taxpayer-funded bailouts to forestall similar mistakes that occurred with the liquidation of Heritage Bank. Market discipline depends on credible failure mechanisms.
“Reform should not focuses only on capital numbers.”
Chief Atedo Peterside loudly made that point very early in the very first cycle. We do not need all that money, he implied. We are agile and nimble with very good governance structures. Hence over the next three decades, all serious banks more or less modeled themselves after IBTC.
“Nigeria does not simply need bigger banks. It needs better banks, institutions capable of financing innovation, supporting entrepreneurs, and building economic opportunity for millions of citizens.”
There is nothing more that I can add.
- Oduche Azih writes from Lagos
