By Chinwendu Obienyi
As the deadline set by the Central Bank of Nigeria (CBN) for banks to turn in their recapitalisation blueprint ends, the apex bank is set to commence the evaluation of the documents, Daily Sun has learnt.
All listed plans will be thoroughly assessed by the apex regulator. The CBN’s scrutiny will focus on various aspects of the submitted plans, including overall compliance, clarity, practicality, market competitiveness, and timeliness. These criteria aim to assess the feasibility and effectiveness of each bank’s roadmap towards achieving the prescribed capitalization targets.
Economic analysts have said that given the diverse nature of the banking landscape and market conditions, banks have outlined a range of strategies, including equity capital injection, mergers and acquisitions, and license authorization upgrades/downgrades.
The CBN raised the capital requirement of banks in the country, giving them a two-year period to meet the new capital base or explore other options such as mergers/acquisitions or downgrading of banking licenses.
According to the new requirement, commercial banks with international licenses are required to have a capital base of N500 billion while their national and regional counterparts are required to have capital base of N200 billion and N50 billion respectively.
Similarly, the capital base of national non-interest banks were raised to N20 billion while that of regional non-interest was raised to N10 billion. Merchant banks were also to raise up to N50 billion.
The CBN also directed the banks to submit their recapitalization plans by April 30, 2024, detailing comprehensive steps, transactional specifics and alternative options to meet the new minimum capital base within the stipulated two-year compliance period ending March 31, 2026.
Explaining the reason for recapitalization, the CBN Governor, Olayemi Cardoso, while briefing newsmen after the 294th meeting of the Monetary Policy Committee (MPC) which held in March, said the committee examined developments in the banking sector and expressed satisfaction that the industry remained safe and sound.
He however, noted that to guard against risk and enhance banks’ resilience, solvency and capacity to continue supporting the growth of the Nigerian economy, banks should accelerate their recapitalization efforts. According to him, the CBN would maintain strict surveillance.
“The committee thus called on the bank (CBN) to sustain its surveillance and ensure compliance of banks with existing regulatory and macro-potential guidelines. The MPC also enjoined banks to expedite actions on the recapitalization of banks to strengthen the system against potential risks in an increased globalized world”, Cardoso added.
With almost all the banks faced with a shortfall in capital, the banks rushed to the capital market to see if they could raise additional capital. The top tiers which include Access Holdings, – announced that they would need shareholders’ approval for N365 billion rights issue out of the $1.5 billion for capital raising.
Similarly, FBN Holdings, GTCO, UBA and Zenith Bank announced that they would need N300 billion, $750 million, N384 billion and N229 billion, respectively. Although, the banks are said to have gotten shareholders’ approvals, there are growing concerns that some other lenders may not meet up with the exercise.
A report by Ernst and Young estimates that 17 out of the 24 banks might not meet the capital requirement from the CBN. Furthermore, there were growing concerns that the economy might not soak the expected capital raising pressure.
They noted that evaluation process will consider the suitability of these strategies in light of each bank’s unique market position and growth prospects.
A stockbroker who craved anonymity, said, “Now that the deadline has come, the CBN’s evaluation will seek to address potential challenges and risks associated with the recapitalization exercise, including adverse impacts on employment and business opportunities.
I know that the apex bank aims to ensure that the recapitalization process contributes to strengthening the banking sector, fostering economic growth, and positioning Nigerian banks for enhanced regional prominence. I still have that gut feeling that some banks might be screened out which will not bode well but I expect that the CBN will evaluate the situation and maintain a resilient and competitive banking sector, while also safeguarding the interests of stakeholders and the broader economy”.