As the deadline for meeting the Central Bank of Nigeria’s (CBN) new minimum capital requirements approaches, Nigerian banks are intensifying efforts to secure the necessary funding. The urgency is palpable as financial institutions race to bolster their capital bases, aiming to avoid potential sanctions or forced mergers.....KINDLY READ THE FULL STORY HERE▶
On March 28, 2024, the CBN issued a circular announcing an upward revision of the minimum capital requirements for commercial, merchant, and non-interest banks in Nigeria.
This move is designed to strengthen the nation’s financial system. The CBN has set a 24-month timeline, beginning April 1, 2024, and ending March 31, 2026, for banks to comply.
Banks are also required to submit an Implementation Plan to the Director of the Banking Supervision Department by April 30, 2024, outlining their strategy for meeting these new requirements.
According to the circular, the new minimum capital requirements are set at N500 billion for commercial banks with international authorization, N200 billion for those with national authorization, and N50 billion for banks with regional licenses.
Merchant banks must meet a new minimum capital of N50 billion, while non-interest banks are required to raise their capital thresholds to N20 billion and N10 billion for national and regional authorisations, respectively.
Currently, major international banks like Access Bank, First Bank, FCMB, GTCO, Fidelity Bank, Zenith Bank, and UBA have a combined capital of approximately N1.3 trillion, necessitating an additional N2.2 trillion to meet the new capitalization requirements.
Similarly, nationally licensed banks such as Ecobank, Stanbic IBTC, Citibank, Keystone Bank, Standard Chartered, Sterling Bank, Union Bank, Unity Bank, Polaris Bank, Wema Bank, Optimus Bank, and Premium Trust Bank face a shortfall of N1.6 trillion to reach the N2.2 trillion target.
In response, banks across the country are exploring various avenues to meet the new requirements. Many have turned to the capital market, issuing new shares to raise funds.
In recent weeks, several banks have announced initiatives to bolster their capital, including public offerings, rights issues, and negotiations with foreign investors. Some are also considering mergers and acquisitions as a strategy to achieve compliance.
Market analysts note that while larger banks are likely to meet the requirements more easily, smaller banks face greater challenges.
“The cost of raising capital in the current economic climate is high, and investor confidence has been undermined by ongoing concerns about the Nigerian economy, including inflation and currency instability,” they opined.
The CBN has remained resolute on the deadline, stressing the importance of a well-capitalized banking sector for Nigeria’s overall economic health. Failure to meet the new capital requirements could trigger a wave of consolidations, as smaller or struggling banks may be forced to merge with larger institutions to stay afloat.
As the deadline nears, the banking sector is under close scrutiny. The outcome of this recapitalization push is expected to have significant implications for the stability and growth of Nigeria’s financial system in the coming years.