On 28 March 2024, the Central Bank of Nigeria (CBN) issued a new policy to strengthen the banking system and support economic growth. The Circular raises the bank minimum capital requirements for commercial, merchant and non-interest banks in Nigeria.
Our newsletter breaks down the updated minimum capital requirements. It explores the implications for the banks involved and outlines the measures they are taking.
New minimum capital for banks in Nigeria
The CBN issued the Circular (No. FPR/DIR/PUB/CIR002/009) on 28 March 2024. It launched the Banking Sector Recapitalization Programme 2024, so that banks have a robust capital base to absorb unexpected losses and contribute to growth. The new minimums, compared with 2005, are:
- Commercial banks: ₦500 billion (international), ₦200 billion (national) and ₦50 billion (regional);
- Merchant banks: ₦50 billion (national); and
- Non-interest banks: ₦20 billion (national) and ₦10 billion (regional).
Stricter rules on the type of capital
Unlike before, the minimum capital must comprise paid-up capital only, plus share premium for existing banks. This excludes retained earnings, which banks historically used to recapitalise. Additional Tier 1 capital is also ineligible. Banks must still meet the minimum capital adequacy ratio for their licence category.
Deadlines and recapitalisation options
Banks had to submit an implementation plan by 30 April 2024. They then have 24 months, from 1 April 2024 to 31 March 2026, to recapitalise. For new licence applications, the new rules apply from 1 April 2024. The Circular lists three options:
- issuing new common shares, by public offer, rights issue or private placement;
- mergers and acquisitions; or
- upgrading or downgrading their licence category.
Recapitalisation in context
This is familiar terrain. The 2005 drive raised minimum share capital from ₦2 billion to ₦25 billion. As a result, the number of banks fell from 89 to 25. Several banks have already sought shareholder approval for capital raises, including Access Bank, GT Holding Company and Zenith Bank.
For related reading, see our note on the new minimum capital framework in Nigeria’s insurance sector. To read the full newsletter, use the download button below.
