Recapitalisation: Banks require N2.8trn, 5 others N901.8bn to meet requirements – Analysts

Based on the analysis of the latest financial data , analysts say commercial banks, excluding Union Bank of Nigeria Plc, will require a combined N2.8 trillion to meet the new baseline capital requirements.

According to analysts at Afrinvest, the effort should necessitate capital raising from both donestic and international markets.

In addition, they said, “assuming the re-engineering of retained earnings to booster eligible capital level (that is share capital and share premium as definined by the Central Bank of Nigeia (CBN) for the recapitalisation exercise), our estimation indicates that approximately N901.8 billion combined will be needed by Wema, FCMB, Fidelity, Unity and Sterling banks to reach the new benchmark”.

“From our initial assessment, positives from the recapitalization drive include: credit creation in the real sector, the potential influx of capital into the donestic economy through offshore capital raising endeavors, and the likelihood of the emergence of stronger and more resilient banking entities post-recapitalisation”, said analysts from Afrinvest in their current report made available to Blueprint.

They however warned of possible headwinds. “However, potential headwinds can materialize in the form of the dilution of returns for shareholders, the risk of lenders inadvertently generating bad risk and additional liquidity, and the possibility of high industry concentration following consolidations, leading to oligopolistic infliuence.

The CBN) Thursday last week, March 28, 2024, unveiled new minimum capital requirements for banks, pegging the minimum capital base for commercial banks with international authorisation at N500 Billion.

Confirming this in Abuja, on Thursday, March 28, 2024, the Acting Director, Corporate Communications Department, Mrs. Hakama Sidi Ali said the new minimum capital base for commercial banks with national authorisation is now N200 Billion, while the new requirement for those with regional authorisation is N50 Billion.

Mrs. Sidi Ali also disclosed that the new minimum capital for merchant banks would be N50 Billion, while the new requirements for non-interest banks with national and regional authorisations are N20 Billion and N10 Billion, respectively.

A circular signed by the Director, Financial Policy and Regulation Department, Mr. Haruna Mustafa, to all commercial, merchant, and non-interest banks and promoters of proposed banks emphasized that all banks are required to meet the minimum capital requirement within 24 months commencing from April 1, 2024, and terminating on March 31, 2026.