The Central Bank of Nigeria (CBN) is contemplating mandating commercial banks with international licenses to increase their capital base, potentially surpassing N900 billion.
This development follows Governor Olayemi Cardoso’s announcement of the apex bank’s intention to propel the economy to a $1 trillion.
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Cardinal Stone Securities’ Banking Sector FY 2024 Outlook reveals projections ranging from N181.85 billion for regional banking licenses to an imposing N909.27 billion for international banking licenses. The report, titled “Nigerian banks: On the cusp of a new dawn,” bases these estimates on the possibility of CBN reverting to the capital-to-GDP ratios set in 2005, ranging from 0.04% for regional banks to 0.22% for commercial banks.
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According to the report, the current capital requirements have seen a substantial decline from the 2005 recapitalization exercise. The 2005 requirements, expressed as a percentage of GDP in dollar terms, have plummeted from a range of 0.04% to 0.22% to a meager 0.00% to 0.01% in 2024.
“Banks may be expected to boost capital base to between N181.85 billion (for regional banks) and N909.27 billion (for international banks),” the report states.
It highlights that while many banks are poised to meet these thresholds, achieving the ambitious $1 trillion economic size in seven years might demand even higher capital base requirements.
Tier-1 international banks such as Zenith Bank and UBA are anticipated to surpass the suggested thresholds, signaling a dynamic landscape for Nigeria’s banking sector. The report concludes with a commitment to monitoring developments, eagerly awaiting the apex bank’s final decisions and the specifics of directives and timelines.
