Experts List 5 Banks That Would Exceed CBN's New Minimum Capital Base

Experts List 5 Banks That Would Exceed CBN's New Minimum Capital Base

  • Experts and analysts have weighed in on the new CBN requirement for Nigerian banks based on the recent directive
  • They regarded the directive as a good development that would potentially strengthen the nation's financial system
  • They said that the exercise was long overdue for the financial institution, giving the naira unification journalist Zainab Iwayemi has over three years of experience covering the Economy, Technology, and Capital Market.

Following the move by the Central Bank of Nigeria (CBN) on Thursday to establish new capitalisation criteria for different types of Deposit Money Banks (DMBs), analysts and finance experts supported the announcement, stating that it was long overdue.

banks that can meet new capita requirement
The CBN's recent re-capitalization sets new minimum capital bases of N500 billion for commercial banks with international authorization. Photo Credit: The Trusted Advisor
Source: Getty Images

The CBN's recent re-capitalisation directive sets new minimum capital bases of N500 billion for commercial banks with international authorisation, N50 billion for banks with regional status, and N20 billion for non-interest banks with national and regional authorisations, respectively.

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In his remarks, as reported in a New Telegraph report, Prof Uche Uwaleke supported the re-capitalisation of banks, calling it a positive step.

He claimed that it would also potentially strengthen the nation's financial system and help the stock market.

He stated that, in contrast to the uniform capital base of N25 billion specified in 2005, the new calibrated minimum capital requirements seem reasonable in light of the devaluation of the naira that followed the unification of exchange rates.

Tier-one banks will win

In the view of Uwaleke, banks recognised as tier one with international authorisation tend to meet the new capital.

He said:

“I believe the FUGAZ (FBN, UBA, GTB, Access and Zenith) banks with international authorisationn will have no difficulty meeting this requirement. The stock market (Option 1) presents the most feasible option as few will likely go the Merger & Acquisition route. Access Bank has already announced raising N365 billion via the Rights issue. I also think the two-year period allowed is sufficient to implement recapitalisation.

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He pointed out that certain banks, such as FBN, Access, and Fidelity, had started the re-capitalisation process earlier than expected, particularly after the CBN Governor's declaration in November of last year.

He suggested:

“I equally think that since the new capital base is based onthe type of authorisationn (International, National or Regional), the CBN may consider applying a differentiated CRR according to the category of license instead of a uniform rate (currently 45%) for commercial banks.
“In view of the young age of Non-Interest Banks in Nigeria, they should be allowed a more extended period, say, 3 years to meet the minimum capital requirement,“

Dr. Aliyu Ilias, a different financial analyst, stated that the banks had long anticipated re-capitalisation given their recent trillion-naira gains.

According to him, banks are prepared to recapitalise because most of them are already reporting trillion-dollar profits; as a result, the approval of banks to pay N500 billion in capital is not much of an issue.

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He said:

“The situation today is different from 2004 and 2005 when Prof. Charles Soludomoved thecapitalisationn from N2 billion to N25 billion. During that era, N100equalled a dollara, which moved the capitalisation,n but now we have about N1,300 to a dollar. It’s instructive to re-capitalize.
“More importantly, banks’ re-capitalization will aid the realisation of the $1 trillion economy of the current administration of President Bola Ahmed Tinubu”.
Meanwhile, Fidelis Obaniyi, an Economist said that the purpose of this is to foster resilience and Stability in the banking sector.

He said,

"The primary role of these commercial banks is intermediation between the surplus and deficit sides. But most of them focus on making money from FX arbitrage.
"I think commercial banks would now focus more on their primary purpose and pursue the goal of financial sector development."

CBN takes another bold step to help naira reported that the Central Bank of Nigeria successfully sold N1.3 trillion worth of treasury bills on Wednesday, March 6, 2024, at a very high rate, targeting foreign portfolio investors (FPIs).

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This is part of CBN's efforts to attract liquidity to strengthen the naira, which has been experiencing a free fall lately due to a shortage in forex supply.

Treasury Bills, or T-Bills, are government-backed, short-term securities issued by the CBN. They are issued when the government needs to borrow funds for some time. They have a maximum maturity of 364 days.


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