The Central Bank of Nigeria’s (CBN) recent announcement of new minimum capital requirements has stirred significant speculation within the banking sector.
With the unveiling of a two-year compliance window, beginning April 1, 2024, and ending March 31, 2026, banks are gearing up to meet the stringent new standards.
However, amidst this regulatory upheaval, concerns loom large over the fate of several institutions.
According to recent reports, as many as 11 Nigerian banks may be at risk of acquisition due to their potential inability to meet the revised capital requirements.
The CBN’s directive, which mandates a substantial increase in minimum capital bases across various categories of banks, has placed immense pressure on financial institutions to shore up their capital reserves.
Under the new framework, commercial banks with international authorization are required to maintain a minimum capital base of N500 billion, up from N50 billion. Similarly, banks with the national approval must now have N200 billion, compared to the previous N25 billion.
Merchant banks face a new minimum capital base of N50 billion, while non-interest banks must meet revised requirements of N20 billion for national authorization and N10 billion for regional approval.
The prospect of failing to meet these heightened capital requirements has led to speculation that several banks may become acquisition targets for stronger players in the industry. Institutions such as First Bank, Access Bank, UBA, Guaranty Trust Bank, and Zenith Bank have emerged as potential acquirers, boasting market capitalizations of at least N1 trillion each.
The scenario is similar with the mass mergers and acquisitions witnessed in 2004, following the last major recapitalization exercise spearheaded by former CBN Governor Prof Charles Soludo.
At that time, the increase in minimum capital requirements significantly reduced the number of banks operating in Nigeria.