Twelve banks face capitalisation hurdles, as CBN directive triggers race for funding
By Sodiq Adelakun
A race for funding has commen-ced among commercial and merchant banks as the Central Bank of Nigeria (CBN) mandates a capitalisation surge, leaving twelve banks grappling with the challenge of utilising approximately N4.8 trillion in retained earnings to fortify their capital bases.
In response to both domestic and global economic pressures, the CBN, in a recent circular addressed to commercial, merchant, and non-interest banks, as well as new bank promoters, announced a revision of capital requirements across affected bank categories nationwide.
Acting Director of Corporate Communications at the CBN, Sidi Ali, underscored the necessity of bolstering the banks’ capital bases amidst prevailing economic uncertainties.
The directive stipulates that commercial banks with international authorization must elevate their capital base to N500 billion, national banks to N200 billion, and those with regional authorization to a minimum of N50 billion.
Similarly, non-interest banks with national and regional authorizations are expected to raise their capital to N20 billion and N10 billion, respectively.
The CBN’s move swiftly follows indications from the Monetary Policy Committee of an impending adjustment in bank capital requirements.
Under the directive, only the share capital and share premium items within the Shareholder Fund section of the balance sheet will be recognized in this round of recapitalisation efforts.
Consequently, officials from affected banks are now eyeing various avenues for raising funds, including Eurobonds and private placements from foreign investors, as they navigate the unfolding landscape of the banking sector’s recapitalisation endeavor.
The apex bank circular said, “For Existing Banks a. The minimum capital specified above shall comprise paid-up capital and share premium only. For the avoidance of doubt, the new capital requirement shall NOT be based on Shareholders’ Fund. b. Additional Tier 1 Capital shall not be eligible for the purpose of meeting the new requirement. c. All banks are required to meet the minimum capital requirement within a period of 24 months commencing from April 1, 2024 and terminating on March 31, 2026.
“Notwithstanding the capital increase, banks are to ensure strict compliance with the minimum capital adequacy ratio requirement applicable to their license authorisation. e. In line with extant regulations, banks that breach the CAR requirement shall be required to inject fresh capital to regularise their position.
“CBN has announced that the minimum capital requirement for proposed banks will be in the form of paid-up capital. This requirement is applicable to all new applications for banking licenses submitted after April 1, 2024.”
