Inflation, naira devaluation erode banks’ capital – Operators

<p>Nigeria’s rising inflation and the recent harmonisation of the foreign exchange rates have been identified as factors that have eroded the capital base of banks in the country.</p>, <p>This was disclosed in different interviews with The PUNCH, as two financial institutions also announced that they would be raising additional capital in coming weeks after getting the approval of their shareholders.</p>, <p>Fidelity Bank had stated on Friday that it would seek the approval of its shareholders to raise additional capital via the issuance of 13,200 billion ordinary shares via public offer and rights issue.</p>, <p>It said, “That the issued share capital of the company, currently N16bn made up of 32 billion ordinary shares of N0.50 each, be increased up to N22.6bn by the creation of up to 13,200 billion additional ordinary shares of N0.50 each.”</p>, <p>On Monday, FBN Holdings indicated that it planned to raise fresh capital by way of a rights issue. The lender would raise funds via the creation of 8.974 billion ordinary shares at 50 kobo each.</p>, <p>Reacting to the development, financial analyst, Okechukwu Unegbu, blamed it on Nigeria’s inflation rate, which currently stands at 22.79 per cent, as well as the floating of the naira.</p>, <p>He said the current situation of Nigerian banks was due to these two major factors, describing the state of banks as endangered.</p>, <p>He said, “You have to look at the inflation rate which has eroded the capital base and net worth of the banks. All our banks are endangered. That is why I blame the Central Bank of Nigeria for closing over 100 microfinance banks. They ought to have used some measures to help them because they serve a major segment of the economy.</p>, <p>“Then look at the dollar-naira exchange rate. That has also eroded the capital base of the banks. This calls for caution. If the banks don’t raise their capital base, chances are that they will be in serious liquidity problems. It is rather worrisome because the banks are performing very well.”</p>, <p>A simil