Business
Stakeholders welcome CBN’s fresh minimum capital requirements for banks
Industry analysts have expressed their satisfaction with the directives from the Central Bank of Nigeria (CBN) increasing the minimum capital base requirements for all Banks operating in the country.
The CBN on Thursday raised the minimum capital requirements for banks, pegging the minimum capital base for commercial banks with international authorisation at ₦500 billion, in measures to put the banks in good stead for the envisioned N1 trillion economies.
In the new dispensation expected from April 1, 2026, 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.
Merchant banks would be expected to raise their capital to ₦50 billion, while the new requirements for non-interest banks with national and regional authorisations are ₦20 billion and ₦10 billion, respectively.
Reacting to banking sector recapitalisation, Nigeria’s first professor of capital market, Prof. Uche Uwaleke welcomed the banking sector recapitalisation move by the apex bank, stressing that capital is needed to finance big-ticket projects especially when the government is targeting a $1 trillion economy in a few years.
Uwaleke, who is also the President of the Capital Market Academics of Nigeria, however, expressed, “I think the strategy should be somewhat different from the approach adopted in 2005. It should be more about incentives than coercion.”
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He said some Deposit Money Banks (DMBs), especially FBN Holdings Plc, Access Bank Plc, Zenith Bank Plc, Guaranty Trust Holding Plc, and UBA are already making efforts to increase their capital base.
“The apex bank can also use differential cash reserve requirements as well as preferential participation in the forex market for well-capitalised banks as some of the incentives.
“For whatever it is worth, smaller banks playing at the regional level should not be regulated out of existence.”
Capital market analyst and stockbroker, Charles Fakrogha, also welcomed the banking sector recapitalisation, stressing that the exercise is long overdue.
He, however, expressed that rather than CBN recapitalising the sector, the apex banking regulating body could have strengthened the sector’s corporate governance.
Fakrogha in his words said, “The financial sector, most especially banks have always dominated the stock market. Most Tier-1 and Tier-2 banks have exceeded whatever considerations the CBN may be considering right now. N25 billion is now N2.5 billion looking at the exchange rate. Having a direct impact on the stock market is what we cannot say right now.
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“The last exercise 2015-2016 when we witnessed the emergency of merger banks but at the end of the day, some banks went down. It is a corporate governance issue that CBN should be looking at right now. Let’s have professionals running our financial institutions and let the apex bank be up and running with their operations.”
The last time the CBN increased the capital base for banks was in 2005, when the current Anambra State Governor, Charles Soludo, as the apex bank chief ordered the capital base of banks to go up to ₦25 billion from N2 billion.
Checks revealed that Zenith Bank Plc, United Bank for Africa Plc, FBN Holdings Plc, Ecobank Transnational Incorporated (ETI), Guaranty Trust Holding Company Plc (GTCO), and Access Holdings Plc have over N1 trillion in total equity as of September 30, 2023.
The only financial institution with a deficit in total equity is Unity Bank Plc. The retail bank reported N190.22 billion as of September 30, 2023, from N274.95 billion deficit in 2022.
As of September 30, 2023, Stanbic IBTC Holdings Plc, Fidelity Bank Plc, FCMB Group Plc, Sterling Financial Holdings Company Plc and Wema Bank Plc are listed below the N500 billion mark.