CBN Tightens Financial Grip, Banks Brace For Capital Boost

CBN Tightens Financial Grip, Banks Brace For Capital Boost

The Central Bank of Nigeria (CBN) has unveiled stringent new minimum capital requirements for commercial, merchant, and non-interest banks operating within the country.

This decision, according to the apex bank, is a strategic response to the prevailing macroeconomic challenges and headwinds stemming from both external and domestic shocks.

As outlined in a statement by the CBN’s Acting Director of Corporate Communications Department, Hakama Sidi Ali, the new capital base for commercial banks with international authorization has been pegged at a staggering N500 billion. Nationally authorized commercial banks, on the other hand, must meet a threshold of N200 billion, while those with regional authorization are expected to achieve a capital base of N50 billion.

The CBN’s directive also extends to non-interest banks, with those operating at the national level required to maintain a minimum capital of N20 billion, and their regional counterparts mandated to hold a capital base of N10 billion.

In a circular signed by the Director of Financial Policy and Regulation Department, Haruna Mustafa, and addressed to all commercial, merchant, and non-interest banks, as well as promoters of proposed banks, the CBN emphasized that compliance with the new minimum capital requirements is mandatory within a 24-month window, commencing from April 1, 2024, and concluding on March 31, 2026.

Quoting the circular, “The move, initially disclosed by the CBN Governor, Olayemi Cardoso, in his address to the Annual Bankers’ Dinner in November 2023, was to enhance banks’ resilience, solvency, and capacity to continue supporting the growth of the Nigerian economy.”

In a bid to aid banks in meeting the new capital requirements, the CBN has urged them to consider injecting fresh equity capital through various avenues, including private placements, rights issues, and offers for subscription. Additionally, the apex bank has recommended exploring mergers and acquisitions (M&As), as well as the option to upgrade or downgrade their license authorization.

Furthermore, the circular clarified that the minimum capital shall comprise paid-up capital and share premium only, stressing that the new capital requirement shall not be based on the Shareholders’ Fund.

The CBN’s directive also extends to proposed banks, with the circular stating that the minimum capital requirement for such entities shall be paid-up capital. Notably, the new minimum capital requirement shall apply to all new applications for banking licenses submitted after April 1, 2024.

As the Nigerian banking sector braces for this seismic shift, the CBN’s move underscores its commitment to fostering a resilient and robust financial ecosystem, capable of withstanding economic turbulence while driving sustained growth in the nation’s economy.