The Central Bank of Nigeria (CBN) has announced new minimum capital requirements for banks, setting the minimum capital base for commercial banks with international authorisation at ₦500 billion.
This move aims to strengthen the financial sector and ensure robustness in the banking industry.
In a circular issued to all commercial, merchant, and non-interest banks, as well as promoters of proposed banks, the Director of the Financial Policy and Regulation Department, Haruna Mustafa, outlined the new requirements.
Banks are mandated to meet these minimum capital requirements within 24 months, starting from April 1, 2024, and ending on March 31, 2026.
CBN spokesperson Hakama Sidi Ali confirmed the development, emphasizing the importance of the new capital requirements in enhancing the resilience and stability of the banking sector.
Under the new framework, the minimum capital base for commercial banks with national authorisation has been raised to ₦200 billion, while those with regional authorisation must maintain a minimum capital base of ₦50 billion.
Merchant banks are required to have a minimum capital base of ₦50 billion, and non-interest banks with national and regional authorisations must maintain minimum capital bases of ₦20 billion and ₦10 billion, respectively.
The decision to raise the capital requirements comes shortly after CBN Governor Olayemi Cardoso’s call for deposit money banks to expedite action on recapitalisation efforts to fortify the financial system.
Governor Cardoso had earlier indicated the need for commercial banks to increase their capital base to support the ambitious goal of building a $1 trillion economy under the administration of President Bola Tinubu.
The last adjustment to the capital base for banks occurred in 2005 under the leadership of then CBN Governor Charles Soludo, raising the capital base from ₦2 billion to ₦25 billion.
To assist banks in meeting the new requirements, the CBN has suggested various options, including private placements, rights issues, mergers and acquisitions, and license upgrades or downgrades.
The apex bank clarified that the new capital requirement shall comprise paid-up capital and share premium only, excluding Additional Tier 1 (AT1) Capital.
“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,” the apex bank’s circular added.
All banks are required to submit an implementation plan outlining their chosen strategies for meeting the new capital requirement by April 30, 2024. The CBN will monitor and ensure compliance with the new requirements within the specified timeline.
Furthermore, the CBN announced that the new minimum capital requirement shall apply to all new applications for banking licenses submitted after April 1, 2024.
Pending applications for banking licenses will be processed accordingly, with promoters required to bridge the gap between the capital deposited and the new capital requirement by March 31, 2026.
