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The stakes are high for the commercial banks with international banking licenses as they have been directed by the Central bank of Nigeria (CBN) to elevate their capital base to surpass N900 billion.
The Banking Sector FY 2024 Outlook report presented by CardinalStone Securities, projects a potential capital increase requirement for Nigerian banks. The estimates range from N181.85bn for regional banking licenses to N909.27bn for international banking licenses.
Based on the report, these projections are influenced by the possibility of the CBN returning to the dollar ratios of capital bases-to-GDP set in 2005. The ratios in 2005 ranged from 0.04 per cent for regional banks to 0.22 per cent for commercial banks.
The report acknowledges a substantial decline since the 2005 recapitalization exercise, with current requirements ranging from 0.00 per cent to 0.01 per cent of the GDP in dollar terms as of 2024.
The report suggests that banks might need to enhance their capital base to meet the proposed requirements, with the majority likely to navigate the challenge successfully.
CBN expects the Tier-1 international banks like Zenith Bank and UBA to exceed the implied thresholds in the next seven years. The report concludes by expressing the need for continued monitoring of developments in this space to observe the CBN's final decision and the structure of the directives and timelines.
