S&P Global
S&P Global ratings: Increase in minimum capital requirement to strengthen Nigerian banks
S&P Global Ratings has asserted that the Central Bank of Nigeria’s (CBN) decision to raise the minimum capital requirement for banks operating in the country could bolster Nigerian banks’ competitive stance against international and pan-African banking groups.
Outlined in a circular dated March 28, the CBN announced a revision of minimum capital requirements for various categories of banks.
Banks with international authorization must now have a minimum capital of N500 billion, while commercial banks with national approval must maintain N200 billion, and those with regional authorization need N50 billion.
Additionally, merchant banks must hold a minimum capital of N50 billion, and non-interest banks with national and regional authorization are mandated to maintain N20 billion and N10 billion, respectively.
Rather than mandating recapitalization through retained earnings and reserves, banks are given 24 months to bolster their capital base through fresh equity injection, consolidation, or license downgrading.
In a recent analysis, analysts at S&P Global Ratings say the increase in capitalization will enhance banks’ capacity to absorb credit losses.
They highlighted that despite 21 licensed banks in Nigeria, the top five banks account for approximately 70% of the system’s assets and face a collective capital shortfall estimated at around N1.5 trillion.
Based on third-quarter 2023 data, S&P estimates a capital shortfall of about NGN2.5 trillion for the rated banks.
Olayemi Cardoso, the Governor of the Central Bank, had previously cautioned banks to fortify their capital base to enhance resilience against economic shocks and better position themselves to support the economy.
Meanwhile, the Association of Corporate & Marketing Communication Professionals of Banks (ACAMB) have assured stakeholders, particularly depositors, that there is no cause for alarm.
ACAMB welcomed the CBN’s circular on the recapitalization exercise and expressed confidence in banks’ ability to meet the new capital requirements.
In a statement, ACAMB’s President, Rasheed Bolarinwa, emphasized the importance of strengthening banks to meet competitive domestic and global financial needs.