Onome Amuge
A new round of banking industry consolidation in Nigeria that will see serious boardroom talks in the next two years has been triggered by the Central Bank of Nigeria (CBN) whose Easter 2024 gift to banks was the raising of their minimum capital requirement to N500 billion for those of them with international authorisation. The CBN decision to raise the minimum capital base of banks to N500 billion for commercial banks with international authorisation is expected to trigger a wave of mergers and acquisitions in the sector as banks strive to stay in business. The stakes are indeed high for the country's financial institutions. In order to meet the new N500 billion minimum capital base for banks with international authorisation, 26 banks will need to raise a total of N3.972 trillion within the next 24 months. The momentous task, according to the CBN, is part of a broader effort to strengthen the Nigerian banking sector and ensure that banks have the capacity to meet the needs of the country's growing economy. Specifically, it is intended to support the goal of achieving a $1 trillion economy as set by the Bola Tinubu administration. The CBN in a circular updated on its website recently, titled REVIEW OF MINIMUM CAPITAL REQUIREMENTS FOR COMMERCIAL, MERCHANT, AND NON-INTEREST BANKS IN NIGERIA, and signed by Haruna Mustafa, the apex bank’s director of financial policy and regulation department, stated that the current macroeconomic challenges and external and domestic shocks have made it imperative for banks to increase and maintain adequate capital levels, to ensure resilience and solvency. The CBN further explained that strong and resilient banks are crucial for promoting financial stability and supporting economic growth in Nigeria. The CBN cited its responsibility to promote a safe, sound, and stable banking system, as laid out in Section 9 of the Banks and Other Financial Institutions Act (BOFIA) 2020, as the basis for the upward review of the minimum capital requirements for commercial, merchant, and non-interest banks in Nigeria. The CBN circular raised the minimum capital requirement for banks with international authorisation from N50 billion to N500 billion, an increase of 900 percent. The minimum capital requirement for commercial banks with national authorisation has been raised from N25 billion to N200 billion, an increase of 800 percent. Banks with regional authorisation are now required to have a minimum capital of N50 billion, an increase of 400 percent over the previous requirement of N10 billion. Meanwhile, the new minimum capital for non-interest banks with national authorisation was raised to N20 billion, while the minimum capital for non-interest banks with regional authorisation was raised to N10 billion. To facilitate compliance with the new minimum capital requirements, the CBN provided a number of options for banks. These include: 1.Injecting fresh equity capital through private placements, rights issue and/or offer for subscription.- Mergers and acquisitions (M&As).