The Central Bank of Nigeria (CBN) has introduced new minimum capital requirements for banks. The apex bank set the new minimum capital base for commercial banks with international banking license at ₦500 billion.
In a circular released Thursday by Haruna Mustafa, CBN’s Director of the Financial Policy and Regulation, the bank directs all commercial, merchant, and non-interest banks, as well as promoters of proposed new banks to shore up their capital base to meet the new requirements within 24 months, April 1 this year to March 31, 2026.
Under the new guidelines, commercial banks with only national banking license are now to raise their capital base to a minimum of ₦200 billion. Commercial banks with regional authorization is pegged at ₦50 billion. Additionally, the minimum capital base for merchant banks is now ₦50 billion, and for non-interest banks with national and regional licenses, it stands at ₦20 billion and ₦10 billion respectively.
Only recently, CBN Governor Olayemi Cardoso during a press briefing was asking deposit money banks to expedite recapitalizing their capital base to boost Nigeria’s financial system. Cardoso said high capital base for the banks were essential instrument in supporting the aspirations of President Bola Tinubu to bolster Nigeria economy into a $1 GDP economy.
The last time banking capital base was reviewed by the CBN was in 2005, under then CBN governor Charles Soludo. He had ordered banks to raise their capital base from ₦2 billion to ₦25 billion.
Options Available To The Banks
To facilitate compliance with the new requirements, the CBN is recommending to banks to consider options such as private placements, rights issues, mergers or acquisitions, or adjusting their banking license. The new minimum capital must consist of paid-up capital and shareholders funds only, excluding Additional Tier 1 (AT1) Capital. Banks were also told to comply with the minimum Capital Adequacy Ratio (CAR) relative to the license they are operating with.
Furthermore, banks are required to submit their implementation plan, outlining the method they wish to adopt in meeting the new capital requirement by April 30, 2024. The CBN will monitor and ensure compliance within the specified timeframe.
The CBN circular also directed that the minimum capital requirement for proposed new banks shall be paid-up capital and the new minimum capital requirement shall apply to all new applications for banking licenses submitted after April 1, 2024.
CBN would continue to process all pending applications for banking licenses for which a capital deposit had been made and/or an Approval-in-Principle had been granted, but the owners of the banks would need to make up the difference between the capital already deposited with the CBN and the new capital requirement on or before March 31, 2026.
As per the directives of the CBN, existing banks are now required to consider only paid-up capital and shareholders funds in calculating their minimum capital, excluding retained earnings that would typically contribute to banks’ shareholders’ funds.
How The Banks Currently Stand
Consequent to this new policy, banks holding international banking licenses, such as Access Bank with a current capital base of ₦251.81 billion must raise additional ₦248.19 billion to comply with the new capital requirement.
Other international banks like Ecobank, presently with a capital of ₦353.51 billion, would need to raise ₦146.49 billion. First Bank of Nigeria Holdings (FBNH) Plc, with ₦251.34 billion, would require additional ₦248.66 billion. First City Merchant Bank, having ₦125.29 billion, need ₦374.71 billion more. Guarantee Trust Bank, currently at ₦138.19 billion, would need to source ₦361.81 billion, while Fidelity Bank, with ₦115.31 billion, would have to inject additional ₦384.70 billion.
Other international banks, United Bank for Africa, with capital of ₦115.82 billion, will need ₦384.18 billion to comply with the new regulation, and Zenith Bank, with ₦270.75 billion has to find ₦229.26 billion to stay in business.
Meanwhile, national banks such as Stanbic IBTC, with capital base of ₦109.26 billion, need only ₦90.74 billion to reach ₦200 billion mark, while Sterling Bank, with ₦57.15 billion must find another ₦142.85 billion.
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