Nigeria’s apex financial sector regulator, the Central Bank of Nigeria (CBN) on Friday gave all commercial banks in the country 24 months to adjust their capital base from the current N25 billion to a minimum of N200 billion.
The directive was contained in a circular by the Director, Financial Policy and Regulation Department of the CBN, Haruna Mustafa, to all commercial, merchant, and non-interest banks as well as promoters of proposed banks in the country.
The circular is coming days after the apex bank governor, Olayemi Cardoso, urged Nigerian banks to expedite action on the recapitalisation of their capital bases in order to strengthen the financial system.
In the circular released on Thursday in Abuja by CBN’s Acting Director of Corporate Communications Department, Hakama Sidi-Ali, a new minimum capital requirements were unveiled for all banks.
From a minimum capital base of N25 billion, from the previous N2 billion, fixed by the former CBN governor, Charles Soludo, since 2004 under the last bank recapitalisation exercise in the country’s banking industry, the circular said all commercial banks with international authorisation would in the next 24 months have a minimum capital base of N500 billion.
Also, the CBN said new minimum capital base for commercial banks with national authorisation would now be N200 Billion, while the new requirement for those with regional authorization would be N50 billion, same as merchant banks, while non-interest banks with national and regional authorisations would be required to have a minimum capital base of N20 billion and N10 billion, respectively.
The circular emphasized that all banks were required to meet the minimum capital requirement within 24 months commencing from April 1, 2024, terminating on March 31, 2026
The new policy was initially broached by the CBN governor in his address to the Annual Bankers’ Dinner in November 2023.
He said the urgent need for the recapitalisation of the banks in the country was to enhance the banks’ resilience, solvency, and capacity to continue supporting the growth of the Nigerian economy.
To enable the banks meet the minimum capital requirements, the CBN urged banks to consider injecting fresh equity capital through private placements, rights issues and/or offers for subscription; Mergers and Acquisitions (M&As); and/or upgrade or downgrade of license authorisation.
Besides, the circular explained that the minimum capital shall comprise paid-up capital and share premium only, the new capital requirement shall not be based on the Shareholders’ Fund.
“Additional Tier 1 (AT1) Capital,which shall not be eligible for meeting the new requirement.
Notwithstanding the capital increase, the CBN said banks were to ensure strict compliance with the minimum capital adequacy ratio (CAR) requirement applicable to their licence authorisation.
“In line with extant regulations, banks that breach the CAR requirement shall be required to inject fresh capital to regularise their position,” the circular said.
In addition, the CBN circular 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.
CBN, the circular pointed out, would continue to process all pending applications for banking licenses for which a capital deposit had been made and/or an Approval-in-Principle (AIP) had been granted.
However, the circular said 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.
Meanwhile, the CBN said all banks were 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 monitor and ensure compliance with the new requirements within the specified timeline.
