CBN Raises Capital Base for Mega Banks to N500bn, Introduces New Guidelines

By Milcah Tanimu

The Central Bank of Nigeria (CBN) has introduced new guidelines on its recapitalization policy for banks in the country, barely 48 hours after emphasizing the need to enhance the capital base of Deposit Money Banks (DMBs) for improved productivity.

According to a statement signed by its Acting Director, Corporate Communications, Sidi Ali, commercial banks with international authorization are mandated to increase their capital base to N500bn, while national banks are required to reach N200bn.

Furthermore, commercial banks with national licenses must meet a N200bn threshold, whereas those with regional authorization are expected to achieve a N50bn capital floor.

Similarly, non-interest banks with national and regional authorizations will need to raise their capital to N20bn and N10bn, respectively.

The CBN’s move follows the recent Monetary Policy Committee meeting, where the committee urged DMBs to expedite actions to bolster their capital base to fortify the financial system against potential risks.

Emphasizing the importance of the banking sector’s resilience, CBN Governor Olayemi Cardoso reiterated the need for banks to adhere to existing regulatory guidelines and accelerate recapitalization efforts.

The proposed increase in the capital base marks a significant development nearly two decades after the 2004 banking reform, which saw the minimum capital base raised from N2bn to N25bn, resulting in massive mergers and acquisitions in the industry.

Despite potential challenges, the CBN has proceeded with its directive, issuing a circular to all commercial, merchant, and non-interest banks, as well as promoters of proposed banks, to meet the new minimum capital requirement within 24 months, commencing from April 1, 2024, to March 31, 2026.

To facilitate compliance, banks are encouraged to consider various options such as private placements, rights issues, mergers and acquisitions, and license authorization upgrades or downgrades to inject fresh equity capital.

The circular clarified that the minimum capital shall comprise paid-up capital and share premium only, underscoring the importance of meeting the new capital requirement to enhance the resilience of the banking sector in Nigeria.