The Central Bank of Nigeria (CBN) has announced new guidelines on bank recapitalization, barely 48 hours after emphasizing the need for increased capitalization to enhance the productivity of Deposit Money Banks (DMBs) in the country.
The updated guidelines were revealed by the Acting Director of Corporate Communications, Sidi Ali, in Abuja.
According to the new directives, commercial banks with international authorization are mandated to raise their capital base to N500 billion, while national banks must increase theirs to N200 billion.
Similarly, banks with regional authorization are required to achieve a capital floor of N50 billion.
Non-interest banks with national and regional authorizations are also included in the new guidelines, with capital requirements set at N20 billion and N10 billion, respectively.
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The decision comes shortly after the Monetary Policy Committee hinted at changes to the capital base of Nigerian banks.
CBN Governor Olayemi Cardoso, in a press briefing following the 294th MPC meeting, urged DMBs to expedite their efforts in increasing their capital base to fortify the financial system against potential risks.
The move follows concerns raised by Ernst and Young indicating that 17 out of 24 existing DMBs may struggle to meet the new capital requirement, should it be increased from the current N25 billion.
Despite the possible disruptions, the CBN has proceeded with its plan to increase the capital base.
To facilitate compliance, the CBN has urged banks to consider injecting fresh equity capital through various means, including private placements, rights issues, mergers and acquisitions, and license upgrades or downgrades.
The directive also emphasizes that the new capital requirement shall comprise paid-up capital and share premium only, excluding shareholders’ funds.
The CBN has mandated all banks to submit an implementation plan detailing their chosen options for meeting the new capital requirement by April 30, 2024.
The apex bank will monitor and ensure compliance with the new requirements within the specified timeline.
Industry experts, including Dr. Muda Yusuf and Professor Uche Uwaleke, have welcomed the move but suggested that banks should be incentivized rather than coerced into increasing their capital base.
They believe that the current capital base is inadequate and needs to be reviewed in light of depreciating domestic currency and the country’s ambitious economic targets.
Overall, the CBN’s decision reflects its commitment to strengthening the banking sector to support Nigeria’s economic growth ambitions while ensuring financial stability and resilience against potential risks.
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