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Recapitalisation: Banks Rush to Meet New Capital Requirements

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Nigerian banks have started submitting their plans to raise new capital requirements as per the recent directives of the Central Bank of Nigeria.

Acting Director of Corporate Services, Hakama Sidi Ali, announced this on Tuesday, highlighting the banks’ efforts to meet the new standards set out in the CBN’s recent circular.

These plans are currently under review by the CBN.

The new requirements are aimed at increasing the banks’ capital, enabling them to better handle economic challenges and provide more credit to key sectors.

Analysts have said that the recapitalisation will boost Nigeria’s economy, pushing it towards the $1 trillion mark.

In the statement, Ali reassured stakeholders of the CBN’s commitment to maintaining a stable financial system.

“Our financial system remains on solid footing. The CBN will continue to take all necessary steps to maintain its safety and soundness,” he said.

The CBN circular, issued in March 2024, requires all commercial, merchant, and non-interest banks to meet the new minimum capital requirements within 24 months, from April 1, 2024, to March 31, 2026.

The new minimum capital base is set at ₦200 billion for commercial banks with national authorization and ₦50 billion for those with regional authorization.

For merchant banks, the requirement is ₦50 billion. Non-interest banks must meet a ₦20 billion minimum for national authorization and ₦10 billion for regional authorization.

CBN Governor Olayemi Cardoso recently urged banks to expedite their recapitalization efforts to strengthen the financial system.

He emphasized the importance of this initiative for achieving President Bola Tinubu’s vision of a $1 trillion economy.

The last major increase in the banks’ capital base was in 2005 under then-CBN Governor Charles Soludo, when it was raised from ₦2 billion to ₦25 billion.

The CBN has suggested that banks consider various strategies to meet the new requirements, including private placements, rights issues, mergers and acquisitions, or changing their license authorizations.

The new capital requirement will include only paid-up capital and share premium, not shareholders’ funds. Banks must maintain a minimum capital adequacy ratio (CAR) and inject fresh capital if they fail to meet this requirement.

Banks are required to submit their implementation plans, detailing their chosen methods for meeting the new capital requirements, by April 30, 2024.

The CBN will monitor compliance with these new standards.

For proposed banks, the new minimum capital requirement applies to all new banking license applications submitted after April 1, 2024. Existing applications will be processed, but promoters must meet the new capital requirements by March 31, 2026.

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