CBN sets new minimum capital requirements for banks in Nigeria, aims to strengthen financial system

The Central Bank of Nigeria (CBN) recently revised the minimum capital requirements for different categories of banks in the country. According to the new directives, commercial banks with international authorization are required to have a minimum capital of N500 billion, while those with national authorization need N200 billion. Meanwhile, banks with regional licenses are mandated to maintain a N50 billion capital base.

CBN’s Acting Director of Corporate Communications, Mrs. Hakama Sidi Ali, indicated in a statement that these new capital requirements must be met by March 31, 2026.

Additionally, merchant banks are now supposed to uphold a minimum capital threshold of N50 billion. A new mandate for non-interest banks requires those with national authorization to enhance their capital base to N20 billion, and those with regional authorizations to N10 billion.

This announcement followed a recent reminder from the CBN to financial institutions about the urgency to recapitalize in order to fortify the financial system.

According to a circular addressed to various types of banks, including commercial, merchant, non-interest banks and potential bank founders, these financial institutions are required to align with the new minimum capital thresholds within 24 months, starting from April 1, 2024, and ending on March 31, 2026. The circular was signed by Haruna Mustafa, the CBN Director of the Financial Policy and Regulation Department.

The recapitalisation plan was initially revealed by CBN Governor, Mr. Olayemi Cardoso, at the Annual Bankers’ Dinner in November 2023. The goal was to enhance the resilience, solvency, and ability of banks to continue supporting the growth of the Nigerian economy.

To meet the new capital requirements, the CBN advised banks to consider options such as infusing fresh equity capital through private placements, rights issues, offers for subscription, mergers and acquisitions, and license authorisation changes.

According to the circular, the new capital base shall only include paid-up capital and share premium, and the additional Tier 1 (AT1) capital will not be accepted for the new capital threshold. It was highlighted that the requirement would primarily be paid-up capital for proposed banks, applying to all new banking license applications submitted after April 1, 2024.

Despite the capital changes, banks are expected to comply strictly with the capital adequacy ratio (CAR) requirement for their license authorisation. Banks failing to meet CAR requirements will be required to inject fresh capital.

CBN said it would continue to process applications for banking licenses for which a capital deposit had been made and/or an Approval-in-Principle (AIP) had already been granted. Promoters of such proposed banks will need to make up the difference between the deposited capital with the CBN and the new capital requirement by March 31, 2026.

Furthermore, all banks have been asked to submit an implementation plan for meeting the new capital requirements by April 30, 2024, and CBN plans to monitor and ensure compliance within this timeline.

With retained earnings no longer being counted towards banks’ shareholders’ funds, international banks such as Access Bank, Ecobank, First Bank of Nigeria Holdings (FBNH) Plc, FCMB, GTB, Fidelity Bank, UBA, and Zenith Bank, and national banks such as Stanbic IBTC and Sterling Bank, will need to raise significant capital to meet the new requirements.