A credit ratings agency, Agusto and Co., have estimated that Nigerian banks may require up to N4 trillion to meet the new Central Bank of Nigeria capital requirements.
The agency in its perspectives on the new rule introduced by the CBN released on Tuesday however stated that if banks could exert pressure on the CBN to allow shareholders to fund or retain earnings in calculating their capital base, the expected inflow would be less than N1.5 trillion.
The credit rating agency said, “We anticipate an inflow of circa N4 trillion to meet the new capital regulation. We anticipate significant pressure on the CBN to use the total shareholders’ funds for the computation of regulatory capital or at least to include retained earnings.
“Should the retained earnings be used for the computation, we expect a reduction in the capital inflow to circa N1.5 trillion.”
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Speaking further, it said that the depreciation in the value of the naira as well as the increase in the number of banks resulting in a breach of the single obligor limit of 20% serves as enough reason for the proposed recapitalisation exercise.
Further, the firm projected a paradigm shift in the banking industry the likes of those witnessed during the last recapitalisation exercise in 2004, adding that the strong performance of banks together with the low valuation could lead to institutional investors flooding the sector.
In conclusion, Augusto and Co. admitted that there could be Mergers and Acquisition (M&A) for banks that may find it difficult to meet the apex bank’s capital requirement.
Daily Trust had reported that on March 28, 2024, the Central Bank of Nigeria (CBN) reviewed the capital requirements for Nigeria’s commercial, merchant, and non-interest banks.
The CBN had pegged N500 billion capital base for Tier-1 banks, N200 billion for national banks and N50 billion for regional banks.
Also recently, while assuring depositors, the Association of Corporate & Marketing Communication Professionals of Banks (ACAMB) stated that there is no need to panic over the recapitalisation of banks as they are ready to meet the 24 months’ deadline.
