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CBN mandates Nigerian banks to boost capital base, sets ₦500 billion minimum requirement



CBN mandates Nigerian banks to boost capital base, sets ₦500 billion minimum requirement

CBN mandates Nigerian banks to boost capital base, sets ₦500 billion minimum requirement

The Central Bank of Nigeria (CBN) has issued a directive raising the minimum capital requirements for commercial banks across various licensing categories, signaling a significant move to strengthen the country’s financial sector. Under the new regulation, banks with international licenses are mandated to increase their capital base to ₦500 billion, while those with regional and national licenses face adjusted capital thresholds of ₦50 billion and ₦200 billion respectively.

The adjustment, announced by the Acting Director of the Corporate Communications Department of the CBN, Hakama Sidi-Ali, extends to other banking sectors as well. Merchant banks are now required to maintain a minimum capital of ₦50 billion, while non-interest banks with national and regional authorizations face revised capital requirements of ₦20 billion and ₦10 billion respectively.

This move comes on the heels of deliberations at the recent Monetary Policy Committee (MPC) meeting, where CBN Governor Yemi Cardoso emphasized the urgent need for Nigerian banks to fortify their capital base to bolster the resilience of the financial system.

In a circular signed by the Director of the Financial Policy and Regulation Department, Haruna Mustafa, banks have been given a 24-month window, starting from April 1, to meet the new capital requirements, with the deadline set for March 31, 2026. Mustafa highlighted that the objective behind the capital augmentation is to enhance the banks’ solvency and capacity to sustainably support the growth trajectory of the Nigerian economy.

To comply with the directive, banks are encouraged to explore various avenues, including private placements, rights issues, and offers for subscriptions, to infuse fresh equity capital into their operations. Additionally, options such as mergers and acquisitions (M&As) and license authorization upgrades or downgrades have been suggested as potential strategies for meeting the new capital thresholds.

It’s important to note that the revised minimum capital requirements will encompass paid-up capital and share premium only, excluding Additional Tier 1 (AT1) Capital. Furthermore, banks are reminded of the necessity to maintain strict adherence to the minimum capital adequacy ratio (CAR) requirement applicable to their respective license authorizations. Banks found to be in breach of the CAR requirement will be obligated to inject fresh capital to rectify their position.

For proposed banks seeking licensing approval after April 1, the new capital requirement will be applicable, emphasizing the CBN’s commitment to maintaining robust regulatory standards across the banking sector. While pending applications for banking licenses will continue to be processed, promoters of proposed banks are mandated to bridge the capital deficit between the deposited amount and the new capital requirement by March 31, 2026.

In light of these developments, all banks are required to submit comprehensive implementation plans outlining their chosen strategies for meeting the new capital requirements and associated timelines by April 30. The CBN has affirmed its commitment to closely monitor compliance with the new regulations within the stipulated timeframe, underscoring the importance of ensuring the financial stability and resilience of Nigeria’s banking sector amidst evolving economic dynamics.

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