The Central Bank of Nigeria (CBN) and the Securities and Exchange Commission (SEC) have jointly introduced a comprehensive framework for the 2024 Banking Sector Capitalization Programme. This initiative aims to enhance the stability, resilience, and competitiveness of Nigerian banks.
CENTRAL BANK OF NIGERIA (CBN)
The Banking Sector Recapitalization Programme is a regulatory initiative of the CBN that requires banks (Existing and New) to increase their minimum paid-in common equity capital to a specified amount according to their license category and authorization between 1st April 2024 to 31st March 2026 in a bid to align with the Federal Government’s goal of achieving a $1trillion economy by 2030.
The CBN assessed various factors in determining the appropriate level of the minimum capital requirements. These include Risk profile of banks; Global and domestic headwinds or challenges and their potential impact on banks’ balance sheets; Impact of inflation; Stress tests of banks’ balance sheets, to gauge their resilience to absorb current and unexpected shocks as the goal is to ensure that each institution maintains adequate capital that is commensurate with the risk profile, scale and scope of its operations.
| TYPE OF BANK | AUTHORIZATION | OLD MINIMUM CAP (₦’ BILLION) | NEW MINIMUM CAP (₦’ BILLION) |
| COMMERCIAL | International | 50 | 500 |
| National | 25 | 200 | |
| Regional | 10 | 50 | |
| MERCHANT | National | 15 | 50 |
| NON-INTEREST | National | 10 | 20 |
| Regional | 5 | 10 |
For existing banks, the capital requirements specified above shall be paid-in capital (Paid-up plus Share Premium) only. Bonus issues, other reserves and Additional Tier 1 (AT1 Capital shall not be allowed or recognized for the purpose of meeting the new minimum capital requirements, while all applications for new banking license shall comply with the new capital requirements in the form of Paid-up capital only. However, this does not apply to banks that are already operating above the Minimum Capital Requirement.
SECURITIES AND EXCHANGE COMMISSION (SEC)
The Securities and Exchange Commission (SEC) recently released a comprehensive framework for the 2024 Banking sector capitalization programme in Nigeria in response to a mandate from the CBN, as it emphasized that the framework is an excerpt from the existing rules and regulations of the Commission and should be read in conjunction with the relevant provisions of the Investment and Securities Act, 2007, and the SEC’s rules and regulations, to ensure transparency, efficiency, and compliance.
The capital market is expected to play a significant role in facilitating this recapitalization, with banks leveraging the market to raise the necessary funds or engage in business combinations through Rights issuances, Private placements and Mergers and Acquisition and Upgrade or Downgrade of License Authorizations.
Affected banks and holding companies must regularize and update their corporate information with the Corporate Affairs Commission (CAC) before applying with the SEC. The commission further outlined a streamlined process for application submission stressing that applications and supporting documents must be filed electronically via the dedicated email address, offerapplications@sec.gov.ng.
“Where an issuer has already filed necessary documents with the SEC, such as the Memorandum and Articles of Association or certificate of incorporation, the issuer need not refile these documents for subsequent transactions, provided there has been no change since the previous filing,” the SEC stated.
Timely completion of the application process is crucial for banks seeking to raise capital within the designated timeframe. The framework also outlined the consequences of incomplete applications. These penalties are designed to ensure banks submit complete and accurate information from the outset.
“Where an application is returned for being incomplete – a penalty of ₦1,000,000 and a re-filing fee of ₦100,000 shall apply” states the SEC.
BANKS RAISING CAPITAL TO MEET NEW REQUIREMENT
Some banks have already taken steps to meet the new requirements, mostly through the use of right issues and private placements.
| AUTHORIZATION | BANK NAME | MINIMUM REQUIRED CAPITAL (₦’ BILLION) | CURRENT ACCEPTABLE MINIMUM CAPITAL (₦’ BILLION) | ADDITIONAL REQUIRED CAPITAL (₦’ BILLION) | DISCLOSED CAPITAL RAISING (₦’ BILLION) | OUTSTANDING CAPITAL (₦’ BILLION) | |
| INTERNATIONAL AUTHORISATION | FIDELITY BANK PLC | 500 | 129.71 (2023) | 370.29 | 127.10 | 243.19 | |
| ACCESS CORPORATION PLC | 500 | 251.81 (2024) | 230.42 | 351.00 | – | ||
| GT HOLDING COMPANY | 500 | 138.19 (2023) | 361.81 | 400.50 | – | ||
| FCMB GROUP PLC | 500 | 104.35 (2023) | 395.65 | 113.98 | 281.67 | ||
| FBN PLC | 500 | 251.34 (2024) | 248.66 | 300.00 | – | ||
| UNION BANK PLC | 500 | 148.09 (2023) | 351.91 | – | – | ||
| UNITED BANK FOR AFRICA PLC | 500 | 115.82 (2023) | 384.18 | – | – | ||
| ZENITH BANK PLC | 500 | 270.74 (2024) | 229.26 | – | – | ||
| NATIONAL AUTHORIZATION | WEMA BANK PLC | 200 | 15.13 (2023) | 184.87 | 40.00 | 144.87 | |
| CITIBANK NIGERIA LIMITED | 200 | 14.44 (2022) | 185.56 | – | – | ||
| ECOBANK NIGERIA | 200 | 353.51 (2022) | (+153.51) | – | – | ||
| KEYSTONE BANK LIMITED | 200 | 42.07 (2022) | 157.93 | – | – | ||
| OPTIMUS BANK LIMITED | 200 | 25.00 (2022) | 175.00 | – | – | ||
| POLARIS BANK LIMITED. | 200 | 50.43 (2022) | 149.57 | – | |||
| STANBIC IBTC BANK PLC | 200 | 109.26 (2024) | 90.74 | 550.00 | – | ||
| STANDARD CHARTERED BANK PLC | 200 | 45.41 (2023) | 154.59 | – | – | ||
| STERLING BANK PLC | 200 | 57.16 (2024) | 142.84 | – | – | ||
| TITAN TRUST BANK LIMITED | 200 | 29.20 (2021) | 170.80 | – | – | ||
| UNITY BANK PLC | 200 | 16.33 (2023) | 183.67 | – | – | ||
| REGIONAL AUTHORIZATION | GLOBUS BANK LIMITED | 50 | 45.78 (2023) | 14.22 | 10.00 | 4.22 | |
| PARALLEX BANK LIMITED | 50 | 12.77 (2023) | 37.23 | – | – | ||
| PREMIUMTRUST BANK LIMITED | 50 | 26.00 (2023) | 24 | – | – | ||
| PROVIDUS BANK LIMITED | 50 | 31.87 (2022) | 18.13 | – | – | ||
| SUNTRUST BANK NIGERIA LIMITED | 50 | 19.66 (2022) | 30.34 | – | – | ||
| SIGNATURE BANK LIMITED | 50 | Nil | Nil | – | |||
| MERCHANT BANKS | CORONATION MERCHANT | 50 | 17.28 (2022) | 32.72 | 9.00 | 23.72 | |
| NOVA MERCHANT BANK | 50 | 19.45 (2022) | 30.55 | – | – | ||
| FSDH MERCHANT BANK | 50 | 2.37 (2022) | 47.63 | – | – | ||
| RAND MERCHANT BANK | 50 | 18.00 (2022) | 32.00 | – | – | ||
| FBNQUEST MERCHANT BANK | 50 | 8.20(2022) | 41.80 | – | – | ||
| GREENWICH MERCHANT BANK | 50 | 18.08 (2023) | 31.92 | – | – | ||
| NON-INTEREST NATIONAL AUTHORIZATION | NATIONAL | JAIZ BANK | 20 | 18.61 (2023) | 1.39 | 10.04 | – |
| REGIONAL | TAJ BANK LIMITED | 10 | 14.05 (2022) | (+4.05) | – | – | |
| LOTUS BANK | 10 | 13.03 (2022) | (+3.03) | – | – | ||
The Tier1 banks may successfully raise the required capital given their franchise value, market share and consistent dividend payout to shareholders. However, other bank categories might find capital raising challenging, thus, we anticipate mergers and acquisitions or scale down of the authorization of some banks to comply with the minimum capital directive.
NOTES
- PAID-UP CAPITAL: Paid-up capital is the amount of money a company has received from shareholders in exchange for shares of stock.
- SHARE PREMIUM: Share Premium is the difference between the issue price and the par value of the stock. It is also known as securities premium. The shares are said to be issued at a premium when the issue price of the share is greater than its face value or par value and this premium is then credited to the share premium account of the company.
- TIER1 CAPITAL: Tier 1 capital refers to the core capital held in a bank’s reserves and is used to fund business activities for the bank’s clients. It includes common stock, as well as disclosed reserves (also known as retained earnings) and certain other assets. Tier 1 capital has two components: Common Equity Tier 1 (CET1) and Additional Tier 1.
- COMMON EQUITY TIER 1 (CET1): Common Equity Tier 1 (CET1) is a component of Tier 1 capital and comprises primarily of common stock held by a bank to absorb unexpected losses that arise during the normal course of the bank’s operations.
- ADDITIONAL TIER 1: Additional Tier 1 (AT1) capital refers to a category of financial instruments that enhance a bank’s capital position beyond its core tier 1 capital or common equity. Examples are Noncumulative Shares, Non-redeemable Preferred Shares and Related Surplus, Qualifying Minority Interest and Hybrid Securities.