Nigeria: CBN Introduces New Minimum Capital Requirements, Grants Banks 24 Months for Recapitalization

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Following recent calls for Nigerian banks to expedite their recapitalization efforts to fortify the financial sector, the Central Bank of Nigeria (CBN) has announced new minimum capital requirements for banks. Commercial banks with international authorization are now mandated to maintain a minimum capital base of N500 billion, revealed Acting Director of the Corporate Communications Department, Mrs. Hakama Sidi Ali, in Abuja.

Under the new regulations, the minimum capital base for commercial banks with national authorization has been set at N200 billion, while those with regional authorization must maintain a minimum capital of N50 billion. Additionally, merchant banks are required to have a minimum capital of N50 billion, while non-interest banks with national and regional authorizations are expected to maintain minimum capital of N20 billion and N10 billion, respectively.

A circular issued by the Director of the Financial Policy and Regulation Department, Mr. Haruna Mustafa, to all commercial, merchant, and non-interest banks, as well as promoters of proposed banks, outlined that banks must meet the new minimum capital requirements within 24 months, starting from April 1, 2024, and ending on March 31, 2026.

This initiative, initially mentioned by CBN Governor Olayemi Cardoso during the Annual Bankers’ Dinner in November 2023, aims to bolster banks’ resilience, solvency, and capacity to support Nigeria’s economic growth.

To facilitate compliance with the new capital requirements, the CBN encourages banks to consider various options, including injecting fresh equity capital through private placements, rights issues, or offers for subscription, engaging in mergers and acquisitions (M&As), or adjusting license authorizations.

Furthermore, the circular clarified that the minimum capital should comprise paid-up capital and share premium only, excluding Additional Tier 1 (AT1) Capital. Banks are also reminded to ensure strict compliance with the minimum capital adequacy ratio (CAR) requirement applicable to their license authorization.

For proposed banks, the minimum capital requirement will be paid-up capital, effective for all new applications submitted after April 1, 2024. Pending applications with a capital deposit or an Approval-in-Principle (AIP) granted by the CBN will be processed, but promoters must meet the new capital requirement by March 31, 2026.

Banks are required to submit an implementation plan detailing their chosen options for meeting the new capital requirement and associated activities by April 30, 2024. The CBN will monitor compliance with the new requirements within the specified timeline to ensure adherence.

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