The Central Bank of Nigeria (CBN) has announced a significant increase in the minimum capital base for commercial banks operating within the country. This sweeping financial reform, revealed on Thursday, March 28, 2024, imposes new capital thresholds on banks, categorized by the scope of their operations.
Under the latest policy directive, commercial banks with international authorization are mandated to bolster their capital base to N500 billion, while national banks must achieve a minimum capital threshold of N200 billion. Additionally, banks with regional authorization are expected to maintain a capital floor of N50 billion.
Merchant banks are also subject to a substantial increase, with a new minimum capital requirement set at N50 billion. Similarly, non-interest banks operating nationally and regionally are required to bolster their capital to N20 billion and N10 billion, respectively.
All banks are given a 24-month window, starting from April 1, 2024, to meet the new minimum capital requirements, with the deadline set for March 31, 2026.
The new capital requirement, exclusively comprising paid-up capital and share premium, excludes Shareholders’ Fund from consideration. The CBN has urged banks to explore various avenues to raise fresh equity capital, including private placements, rights issues, offers for subscription, mergers and acquisitions (M&As), and potential license upgrades or downgrades.
The circular emphasized that the minimum capital will solely consist of paid-up capital and share premium, with Additional Tier 1 (AT1) Capital deemed ineligible for meeting the new requirement. Banks falling short of the Capital Adequacy Ratio (CAR) requirement will be required to inject fresh capital to rectify their standing.
For proposed banks, the minimum capital requirement will be the paid-up capital. The new capital requirements will apply to all new applications for banking licenses submitted after April 1, 2024. Promoters of proposed banks must cover the difference between the capital deposited with the CBN and the new capital requirement by no later than March 31, 2026.
Banks are instructed to submit an implementation plan detailing their strategies for meeting the new capital requirement by April 30, 2024. The CBN will closely monitor and ensure compliance with the new requirements within the specified timeframe.
The move comes as part of broader efforts by the CBN to strengthen the financial sector and enhance the resilience of Nigerian banks.
