On March 28, 2024, the Central Bank of Nigeria released a Review of Minimum Capital Requirements for Commercial, Merchant, and Non-Interest Banks in Nigeria.
The Banking Sector Recapitalization Programme 2024 mandated by the Central Bank of Nigeria (CBN), mandates Banks to boost their minimum paid-in common equity capital to a designated threshold based on their respective license category and authorization within a prescribed timeframe.
Why the sudden increase?
The current macroeconomic difficulties, influenced by both external and domestic factors, necessitate the need for Banks to increase and sustain sufficient capital levels. This is crucial to bolster their resilience, solvency, and ability to sustainably contribute to the growth of the Nigerian economy.
Capital Base for the various categories of Banks
The capital base for:
- Commercial Banks with International Authorization was increased from 50 Billion Naira to 500 Billion Naira
- Commercial Banks with National base was increased from 25 Billion Naira to 200 Billion Naira
- Regional Banks, that is those operating within certain States, was increase from 10 Billion Naira to 50 Billion Naira
- Merchant Banks was increased from 15 Billion Naira to 50 Billion Naira
- Non interest Banks operating with National Authorization is 20 Billion Naira
- Non interest Banks operating with Regional Authorization is 10 Billion Naira
Compliance Period
The Banks are required to meet the new threshold within a period of 24 months from April 1 2024 to March 31st 2026.
Options available to the Banks to Meet the New Thresholds
- Inject fresh equity capital
- Mergers and acquisitions
- Upgrade or downgrade of license
The new capital base will also be applicable to new applications for banking licenses submitted after April 1 2024. All pending applications submitted before April 1 2024 will continue to be processed by the CBN but the promoters must ensure that the capital deposits comply with the new capital base before March 31st 2026. Banks are also required to submit an implementation plan to the Director of the Banking Supervision Department on their choice amongst the options available to meet the new capital
What will be the fate of Depositors with this policy?
The implementation of the recapitalization program will not affect the smooth operations of banks even in the face of mergers and acquisition. The CBN will ensure the protection of depositor’s interest.
