CBN issues banks’ recapitalisation guidelines, raises minimum capital base to N500bn

THE Central Bank of Nigeria (CBN) on Thursday, March 28, 2024, unveiled new minimum capital requirements for banks and pegged the minimum capital base for commercial banks with international authorisation at N500 Billion.

The directive came two days after the Tuesday, March 25, monetary Policy Committee meeting urging Nigerian banks to expedite action on the recapitalisation of their capital base to strengthen the financial system.

The last time the CBN increased the capital base for banks was in 2005, when the current Anambra State Governor, Charles Soludo, was the apex bank chief. The capital base was raised from ₦ 2 billion to ₦ 25 billion at the time.

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The acting director of the CBN’s Corporate Communications Department, Hakama Sidi Ali, who confirmed this development late Thursday, March 28, said the new minimum capital base for commercial banks with national authorisation would be N200 billion, while the new requirement for those with regional authorisation would be N50 Billion.

Ali also disclosed that the new minimum capital for merchant banks would be N50 billion, while the new requirement for non-interest banks with national and regional authorisations was N20 billion and N10 billion, respectively.

A circular to this effect signed by the director, Financial Policy and Regulation Department, Haruna Mustafa, to all commercial, merchant, and non-interest banks and promoters of proposed banks stressed that all banks were required to meet the minimum capital requirement within 24 months commencing from April 1, 2024, and terminating on March 31, 2026

According to 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.

To enable them to 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.

Furthermore, the circular disclosed that the 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,” it added.

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.




     

     

    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 (AIP) 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.

    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.

    Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.

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