In a move that could reshape Nigeria’s banking landscape, the Central Bank of Nigeria (CBN) has announced an upward review of capital requirements for commercial banks, compelling 13 lenders to raise approximately N3.31 trillion in fresh capital over the next two years.
As per data compiled from their financial statements, the current share capital plus premium of these banks stands at N1.98 trillion as of 2023. However, in line with the CBN circular, these banks are expected to ramp up their total capital to N5.30 trillion.
Under the new guidelines set by the CBN, banks with international authorization must maintain a minimum capital requirement of N500 billion, while those with national and regional authorization must have N200 billion and N50 billion, respectively. Merchant banks are now mandated to maintain a minimum capital requirement of N50 billion, with non-interest banks holding national and regional authorization required to have N20 billion and N10 billion, respectively.
Several banks are gearing up to meet these new requirements. Access Holdings, parent company of Access Bank, has unveiled plans for a capital raising program of up to $1.5 billion to bolster its financial strength. Similarly, United Bank of Africa is expected to raise the largest sum, amounting to N384.19 billion, to meet the new capitalization requirement. Other major players like FBN Holdings, Guaranty Trust Holding Company, Zenith Bank, Ecobank Transnational Inc., FCMB, and Fidelity Bank are also strategizing to raise substantial amounts.
Experts weigh in on the implications of the CBN’s directive. Ayokunle Olubunmi, head of financial institutions ratings at Agusto Consulting, emphasizes that all banks must raise additional capital, given that none currently meet the required threshold based on paid-up capital alone. He anticipates potential shifts in the banking landscape, including mergers, acquisitions, and the formation of larger banking entities.
Ayodele Akinwunmi, relationship manager at FSDH Merchant Bank, lauds the policy, stating that it will attract foreign investors and stimulate economic growth.
Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise, supports the recapitalization, citing the need for banks to remain stable and absorb shocks in the financial system.
Uche Uwaleke, professor of Capital Market at Nasarawa State University Keffi, views the recapitalization as a welcome development that will strengthen the financial system and potentially boost the stock market. He suggests differentiated cash reserve ratios based on the category of license as a more feasible option for compliance.
With the clock ticking on the two-year deadline set by the CBN, Nigerian banks face a critical juncture as they navigate the path to compliance and chart the course for their future in the evolving banking landscape.
