The Central Bank of Nigeria (CBN) has implemented a significant reform, increasing the minimum capital base for commercial banks with varying scopes of operations. As of Thursday, March 28, 2024, banks must meet new capital thresholds based on the extent of their authorization.
Under the new directive, commercial banks with international authorization must bolster their capital base to N500 billion, while national banks are mandated to reach N200 billion. Regional banks face a N50 billion capital requirement, and merchant banks are subjected to the same threshold. Non-interest banks, national and regional, must also adhere to increased capital thresholds of N20 billion and N10 billion, respectively.
The CBN emphasized that all banks must meet these new capital requirements within 24 months, beginning April 1, 2024, and concluding on March 31, 2026.
To comply with the directive, banks are urged to consider various strategies, including injecting fresh equity capital through private placements, rights issues, or offers for subscription. Mergers and acquisitions (M&As) are also encouraged, as is upgrading or downgrading license authorization.
The new capital requirements exclude Additional Tier 1 (AT1) Capital and will consist solely of paid-up capital and share premium. Banks falling short of the Capital Adequacy Ratio (CAR) requirement will be required to inject additional capital to rectify their standing.
For proposed banks, the minimum capital requirement will be the paid-up capital. The CBN will continue to process pending applications for banking licenses, provided a capital deposit has been made, or an Approval-in-Principle (AIP) has been granted. Promoters of proposed banks must cover the difference between the capital deposited with the CBN and the new capital requirement by March 31, 2026.
Banks must submit an implementation plan outlining their strategies for meeting the new capital requirement by April 30, 2024. The CBN will monitor and ensure compliance within the specified timeframe.
This move by the CBN signifies a significant shift in the financial landscape aimed at strengthening Nigeria’s banking sector’s resilience and stability.
