CBN New Capital Base: Top 5 Banks Face N1.5 Trillion Shortfall

In a move to bolster the financial sector’s resilience and capacity, the Central Bank of Nigeria (CBN) has announced new minimum capital requirements for banks, leaving the top five banks grappling with a staggering N1.5 trillion shortfall.

Under the directives unveiled by CBN Governor Yemi Cardoso, international commercial banks are mandated to raise their minimum capital to N500 billion, marking a monumental 900 per cent increase from the previous N50 billion requirement. Similarly, national commercial banks are now required to maintain a minimum capital base of N200 billion, up by 700 per cent from N25 billion.

The deadline set for compliance is tight, with banks given a 24-month window, starting from April 1, 2024, and ending on March 31, 2026. Acting Director of the Corporate Communications Department, Mrs. Hakama Sidi Ali, confirmed the details, emphasizing the necessity for banks to fortify their solvency and resilience in supporting the Nigerian economy’s growth trajectory.

To meet these heightened capital demands, banks are encouraged to explore various avenues, including private placements, rights issues, mergers and acquisitions, and license authorization upgrades or downgrades. However, the CBN stipulates that the minimum capital shall comprise paid-up capital and share premium only, with Additional Tier 1 (AT1) Capital deemed ineligible.

Notably, the new requirements extend to proposed banks, with a clear implementation plan mandated to be submitted no later than April 30, 2024. The CBN underscores its commitment to monitoring compliance and ensuring adherence to the specified timelines.

Capital Shortfall Highlights

The adjustment in capital requirements places significant pressure on Nigeria’s top banks, namely Access Bank, FirstBank, GTBank, UBA, and Zenith Bank, each mandated to maintain a minimum capital base of N500 billion.

However, a scrutiny of their latest financial results reveals a substantial shortfall:

Access Corporation: N251.811 billion in paid-up capital and share premium, resulting in a shortfall of N248.189 billion.

FBN Holdings: N251.3 billion in paid-up capital and share premium, translating to a deficit of N248.66 billion.

GTHoldco: N138.186 billion in paid-up capital and share premium, leaving a shortfall of N361.814 billion.

UBA: N115.815 billion in paid-up capital and share premium, facing a shortfall of N384.185 billion.

Zenith Bank: N270.745 billion in paid-up capital and share premium, indicating a deficit of N229.255 billion.

The collective shortfall among these banking giants underscores the challenges ahead as they navigate the stringent regulatory landscape set by the CBN.