Nigeria: Mega Banks Lead with N10tn Capital Base as Others Seek Investors

Amid the Central Bank of Nigeria’s (CBN) proposal for a new round of banking sector consolidation, concerns and speculations arise among industry operators. Recent data indicates that major banks with foreign subsidiaries currently boast an impressive N9.6 trillion capital base.

The compiled data reveals that five key banks currently exceed N1 trillion each in capital. An analysis of the current capital base of leading commercial banks in Nigeria suggests that the proposed consolidation, though not fully conceptualized by the apex bank, will likely impact national, regional, and merchant banks.

Olayemi Cardoso, the CBN Governor, emphasized the need for banks to raise their capital base, citing the projected $1 trillion economy outlined by President Bola Tinubu and the impact of currency devaluation on bank operations. The governor stated, “The central bank will be directing banks to increase their capital.”

However, seven tier-1 banks appear prepared for the imminent recapitalization exercise, with a combined capital base of N9.6 trillion as of the end of the 2022 financial year. Zenith Bank, Access Bank, FBN Holdings, GTCO, and United Bank for Africa Plc lead the pack, surpassing the current capital base requirement.

While some industry analysts, like Professor Segun Ajibola, acknowledge the need for recapitalization, he emphasizes the importance of a careful and engaging process to determine the desirable figure that aligns with economic needs. A Chief Financial Officer of a Deposit Money Bank suggests that bigger banks may not face significant challenges, leaving the burden on smaller banks.

Several banks, including Wema Bank, First Bank of Nigeria Holding, and Fidelity Bank, have proposed raising funds from the capital market. The capital market, despite challenges, is seen as capable of meeting recapitalization needs. Stakeholders believe that the market’s resilience and the $1 trillion economy proposition will attract foreign investors.

While some express doubts about the Nigerian capital market’s ability to fully support the recapitalization, others, like Ayodeji Ebo of Afrinvest Securities Limited, suggest that technology adoption and a clear foreign exchange policy will be crucial. The timeline for implementation is another aspect that experts advise to be stretched for a smoother transition.

Amid these discussions, the banking industry experiences various reactions, with some CEOs already engaged in merger and acquisition talks to meet the new capital base requirement. The CBN’s move to enhance the banking sector’s capacity aligns with broader economic goals, emphasizing sustainable and inclusive economic growth.

The recapitalization drive signifies a pivotal moment for Nigerian banks, requiring strategic planning, technology adoption, and engagement with various stakeholders to ensure a seamless transition and foster long-term economic stability.