In a significant move to fortify the nation’s financial sector, the Central Bank of Nigeria (CBN) has unveiled new guidelines for the recapitalization of banks, imposing a substantial increase in capital requirements for major players. Commercial banks with international authorization are now mandated to elevate their capital base to N500 billion, while national banks must reach N200 billion, according to a statement released by the CBN’s Acting Director of Corporate Communications, Sidi Ali.
This directive arrives just two days after the Monetary Policy Committee (MPC) reiterated the necessity for bolstering Deposit Money Banks’ (DMBs) capital bases to enhance the resilience of the financial system. At the conclusion of the 294th MPC meeting earlier this week, CBN Governor Olayemi Cardoso underscored the urgency for DMBs to expedite actions towards meeting these enhanced capitalization requirements.
Previously, the CBN had highlighted the imperative for an augmented capital base, particularly in light of Nigeria’s ambitious goal to achieve a $1 trillion economy by 2026. The proposed capital escalation signals a proactive measure by the apex bank to ensure that banks are adequately positioned to support the nation’s economic aspirations.
The latest capital base adjustments come nearly two decades after the landmark banking reform of 2004, which saw the capital base surge from N2 billion to N25 billion, resulting in significant consolidation within the banking sector.
In response to this directive, banks are urged to consider various avenues for raising fresh capital, including private placements, rights issues, mergers, and acquisitions. The CBN has provided a 24-month window, starting from April 1, 2024, for banks to meet these revised capital requirements. Additionally, all new banking license applications submitted after this date will be subject to the new capital benchmarks.
Despite potential disruptions, the CBN remains resolute in its commitment to fortifying the financial system, with stringent monitoring mechanisms in place to ensure compliance with the prescribed timeline. As Nigeria navigates towards economic growth and resilience, the banking sector plays a pivotal role in supporting this trajectory through robust capitalization and strategic expansion initiatives.
