Banks may be expected to boost their capital base between N181.85 billion for a regional banking license and N909.27 billion for an international banking license.
This is according to the Banking Sector FY 2024 Outlook produced by CardinalStone Securities.
As per the report, the likelihood of this occurrence hinges on the Central Bank of Nigeria’s decision to return to the dollar ratios of capital bases to GDP set in 2005. These ratios ranged from 0.04% for regional banks to 0.22% for commercial banks.
However, the report also noted that the goal of reaching a $1 trillion GDP size in the next 7 years may necessitate an even higher range for capital base requirements.
The report noted there has been a substantial decline from 2005’s recapitalization exercise, as the requirements which ranged from 0.04% to 0.22% of the GDP in USD terms as of 2005, have dropped to a range of 0.00% to 0.01% of the GDP in USD terms as of 2024.
What you should know
In 2005, the capital requirement for an international banking license was put at N50 billion, which translated to $380 million at the time. The national bank capital requirement was put at N25 billion, translating to $190 million.
The regional banking license was put at N10 billion, translating to $80 million, and the merchant bank capital requirement was N15 billion, or $110 million. Using an exchange rate of N132/$ at the time.
As of January 19, 2024, utilizing the exchange rate of N902.45/$, the Naira equivalent of the USD capital requirements as of 2005 suggests a capital base of N342.9 billion for an international banking license.
Additionally, it implies N171.5 billion for a national banking license, N72.2 billion for a regional banking license, and N99.3 billion for a merchant banking license.
Whatever basis the CBN may use for the recapitalization exercise (capital base to GDP ratio or the USD equivalent of 2005), it should be noted that most Nigerian banks are positioned well to navigate the challenge.
As of September 2023, Nigerian banks boast a cumulative capital base of about N11 trillion.
Among the FUGAZ banks, Zenith Bank boasts a capital base of N1.92 trillion, UBA reports a capital base of N1.78 trillion, Access Holdings reports N1.64 trillion, FBN Holdings reports a capital base of N1.37 trillion, and GTCO boasts a capital base of N1.27 trillion.
