Professor Adegbemi Onakoya, an internationally certified expert in quality management and business transformation, has said that all existing Nigerian banks are below the new CBN recapitalization threshold and need to raise a collective N4 trillion to comply.
Prof. Onakoya shared this insight on Saturday during the Nairametrics Economic Outlook webinar, which focused on the Central Bank of Nigeria (CBN) recent policies and their impact on the economy.
Prof. Onakoya explained that the CBN’s recapitalization circular defines the minimum capital requirement as consisting only of paid-up capital and share premium, excluding retained earnings and Tier 1 capital. Consequently, banks need to secure additional funds through the stock market, mergers and acquisitions, rights issues, and private listings to meet this threshold.
Sharing more insight, Prof. Onakoya expressed his belief that the bank recapitalization initiative by the Central Bank of Nigeria will fortify Nigerian banks against external and domestic shocks, particularly in relation to the Naira, which appeared to have weakened, and will enhance the financial system’s stability
Prof. Onakoya highlighted a discrepancy in the Central Bank of Nigeria’s (CBN) regulations regarding minimum capital requirements and the capital adequacy ratio (CAR) for Nigerian banks.
He noted that, unlike the minimum capital requirement that accepts paid-up capital and excludes retained earnings from eligible capital, the CAR calculation includes both paid-up capital and retained earnings, with international banks pegged at 15% and other banks at 10%.
However, he expressed optimism that the CBN would soon issue a circular to harmonize these contradictory regulations.
The Central Bank of Nigeria (CBN) recently raised the minimum capital requirements for commercial banks, with the amount varying according to their operational scope.
This move aims to fortify Nigerian banks against domestic and external shocks and to improve the financial system’s stability.
Under the new regulations, eligible capital will solely comprise paid-up capital and share premium, excluding Shareholders’ Fund and Tier 1 capital.
Banks must meet these minimum capital requirements within a 24-month period, starting from April 1, 2024, and ending on March 31, 2026.
Here’s the breakdown of the minimum capital base for commercial banks according to their scope of operations: