Bank Recapitalisation: CBN Sets New Minimum Capital Requirement For Banks In Nigeria.
Introduction
On the evening of Friday, March 29, 2024, a significant development unfolded in Nigeria’s banking sector as news of bank recapitalisation emerged, marking a pivotal moment that has been the focus of discussions since 2023 amongst various stakeholders.
It would be recalled that on November 24, 2023, during the 58th Annual Bankers’ Dinner organised by the Chartered Institute of Bankers of Nigeria (CIBN), Mr. Olayemi Cardoso, the Governor of the Central Bank of Nigeria (“CBN”), unveiled the CBN’s intention to implement a new banking recapitalisation plan. Governor Cardoso emphasised the need for banks to play a pivotal role in realising Nigeria’s vision of achieving a one trillion-dollar economy by 2030, a cornerstone of the vision advocated by Nigeria’s current President, Bola Ahmed Tinubu.
Against this backdrop and in alignment with its mandate to foster a safe, sound and stable banking system, the CBN, through a circular dated March 28, 2024 (the “Circular”), announced an upward revision of the minimum capital requirements for commercial, merchant, and non-interest banks in Nigeria.
In this article, we delve into the revised minimum capital requirements set by the CBN and explore the CBN’s recapitalisation options as well as the implications on the banking sector in Nigeria.
Overview of Bank Recapitalisation
Banking recapitalisation is essentially the act of shoring up a bank’s capital to meet or exceed the levels mandated by regulatory authorities. In Nigeria, it is a regulatory measure overseen by the CBN, necessitating banks to augment their minimum paid-in common equity capital to a specified amount based on their license category and authorisation within a designated timeframe.[1] This capital requirement is strengthened by the provisions of section 9 of the Banks and Other Financial Institution Act 2020 (BOFIA), which grants the CBN powers to determine the minimum paid-up share capital for the different categories of banks licensed under BOFIA.