The Central Bank of Nigeria (CBN) has announced sweeping financial reforms, significantly raising minimum capital requirements for banks across various categories. In a circular issued by the Financial Policy and Regulation Department Director, Haruna Mustafa, all commercial, merchant, and non-interest banks have been mandated to comply with the new capital thresholds.
Commercial banks with international authorization face the most substantial increase, with the minimum capital base now set at N500 billion, up from N50 billion in 2005. Similarly, national banks are required to meet a new threshold of N200 billion, regional banks N50 billion, and merchant banks N50 billion.
Non-interest banks, both national and regional, are also subject to increased capital requirements, with N20 billion and N10 billion respectively. All banks are given 24 months to meet the new capital requirements, starting from April 1, 2024, and ending on March 31, 2026.
The CBN emphasized the need for banks to enhance their resilience, solvency, and capacity to support Nigeria's economic growth amidst prevailing macroeconomic challenges. To meet the new requirements, banks are encouraged to consider injecting fresh equity capital through private placements, rights issues, or offers for subscription. Additionally, mergers and acquisitions (M&As) are suggested as viable strategies.
However, concerns have been raised regarding the feasibility of meeting the new capital thresholds within the stipulated timeframe. Some industry experts predict that the reforms could trigger a wave of bank mergers and acquisitions as institutions seek to consolidate resources and comply with regulatory requirements.
The CBN has also outlined measures to monitor and ensure compliance with the new requirements, including the submission of implementation plans by banks detailing their strategies for meeting the capital thresholds.
As Nigeria's banking sector braces for significant changes, stakeholders await further developments and anticipate the impact of these reforms on the industry's dynamics and competitiveness.
