The Central Bank of Nigeria (CBN) has issued a circular requiring all banks to meet the minimum capital requirement within 24 months. The apex bank on Thursday, 28 March announced an increase in the capital base for different categories of banks in the country. In a statement by the CBN’s acting director of corporate communications, Hakama Ali, the capital base of banks with international authorization had been increased to N500 billion while that of national banks was increased to N200 billion. The CBN noted that commercial banks with regional authorization are expected to achieve an N50 billion capital base. In contrast, merchant banks are expected to shore up their capital to N50 billion as the minimum capital requirement. In a bid to firm up the financial landscape, the CBN’s directive also includes the merchant banks, which are now subject to a N50 billion minimum capital requirement. Furthermore, non-interest banks with national and regional authorizations will need to bolster their capital to N20 billion and N10 billion respectively.
The CBN insisted that all banks are required to meet the minimum capital requirement within 24 months commencing from April 1, 2024, and terminating on March 31, 2026. The new capital requirement will consist solely of paid-up capital and share premium. This means Shareholders’ Fund will not be considered. Thus, to meet the minimum capital requirements, the CBN has encouraged banks to consider injecting fresh equity capital through private placements, rights issues, and/or offers for subscription; to pursue Mergers and Acquisitions (M&As); and/or to consider upgrading or downgrading their license authorisation.
More so, the circular revealed that the minimum capital will consist solely of paid-up capital and share premium. It emphasized that the new capital requirement would not be based on the Shareholders’ Fund. Additional Tier 1 (AT1) Capital will not be eligible for meeting the new requirement. Despite the increase in capital, banks must ensure strict compliance with the minimum Capital Adequacy Ratio (CAR) requirement applicable to their license authorisation,” the circular stated. It added that banks falling short of the CAR requirement would be mandated to inject fresh capital to rectify their standing.
The CBN circular stated that the minimum capital requirement for proposed banks would be the paid-up capital. The new minimum capital requirement will apply to all new applications for banking licenses submitted after April 1, 2024. The circular also mentioned that the CBN would continue to process all pending applications for banking licenses where a capital deposit has been made and/or an Approval-in-Principle (AIP) has been granted. However, it stipulated that the promoters of such proposed banks must cover the difference between the capital deposited with the CBN and the new capital requirement by no later than March 31, 2026. The CBN requires all banks to submit an implementation plan, clearly indicating their chosen methods for meeting the new capital requirement and detailing the various activities and their timelines, by no later than April 30, 2024—reiterating that it will monitor and ensure compliance with the new requirements within the specified timeframe.
