Nigeria’s apex bank and regulator, Central Bank of Nigeria (CBN) has announced need capital basis for different category of banks operating in the country.
NewsClick Nigeria reports that the lender of last resort pegged capital basis of commercial banks with international permission to N500 billion and national banks to N200 billion.
This comprehensive financial reform, unveiled on Thursday, March 28, 2024, requires significant increases in the minimum capital base for banks, which vary depending on the scope of their operations.
A circular signed by the Director, Financial Policy and Regulation Department, Haruna Mustafa, to all commercial, merchant, and non-interest banks and promoters of proposed banks emphasised that all banks are required to meet the minimum capital requirement within 24 months commencing from April 1, 2024, and terminating on March 31, 2026.
CBN spokesperson, Hakama Sidi Ali, confirmed the development in Abuja on Thursday.
According to Ali, the new minimum capital base for commercial banks with national authorisation is now ₦200 billion, while the new requirement for those with regional authorisation is ₦50 billion.
The apex bank also disclosed that the new minimum capital for merchant banks would be ₦50 billion, while the new requirements for non-interest banks with national and regional authorisations are ₦20 billion and ₦10 billion, respectively.
NewsClick Nigeria reports that the announcement comes just days after CBN Governor, Olayemi Cardoso, urged deposit money banks to expedite action on the recapitalisation of their capital base in order to strengthen the financial system.
Recall that Cardoso had in November 2023, two months after assumption of office said commercial banks in the country would be directed to increase their capital base to service a $1 trillion economy ambition of the President Bola Tinubu administration.
The last time the CBN increased capital base for banks was in 2005, when the current Anambra State Governor, Charles Soludo, was the apex bank chief. Capital base was raised from ₦2bn to ₦25bn.
It added that banks falling short of the CAR requirement would be mandated to inject fresh capital to rectify their standing.
CBN throws options at banks
To enable banks meet the new minimum capital requirements, the CBN, on Thursday, urged banks to consider inject fresh equity capital through private placements, rights issues and/or offers for subscription; Mergers and Acquisitions, and/or upgrade or downgrade of license authorisation.
The apex also said the new minimum capital shall comprise paid-up capital and share premium only. It stressed that the new capital requirement shall not be based on the Shareholders’ Fund.
“Additional Tier 1 (AT1) Capital shall not be eligible for meeting the new requirement. Notwithstanding the capital increase, banks are to ensure strict compliance with the minimum capital adequacy ratio (CAR) requirement applicable to their license authorisation.
“In line with extant regulations, banks that breach the CAR requirement shall be required to inject fresh capital to regularise their position,” the apex bank’s circular added.
Submission of implementation plan
Meanwhile, the CBN said all banks are required to submit an implementation plan (clearly indicating the chosen option(s) for meeting the new capital requirement and various activities involved with their timelines) no later than April 30, 2024.
The CBN also disclosed that it would l monitor and ensure compliance with the new requirements within the specified timeline.
The CBN circular further said the minimum capital requirement for proposed banks shall be paid-up capital, adding that the new minimum capital requirement shall apply to all new applications for banking licenses submitted after April 1, 2024.
It noted that the 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.
However, it said that the promoters of such proposed banks would make up the difference between the capital deposited with the CBN and the new capital requirement no later than March 31, 2026.