Banks are revving up multi-layered strategies as the banking recapitalisation draws down to its final and most decisive phase.
With barely 52 working days to the deadline for banks to meet new capital requirements, many are narrowing down their options, with more focus on snap private equity and a shift along the banking categorisation line.
Ahead of the March 31 deadline, Central Bank of Nigeria (CBN) Governor Olayemi Cardoso, in his last public update on the recapitalisation programme, confirmed that 16 banks have met their new capital requirements. He also indicated that 27 other banks were raising funds.
Deputy Governor, Economic Policy, CBN, Dr Muhammad Abdullahi, who spoke a few days ago, said not less than 20 banks have met the new capital requirements.
Abdullahi’s comment came on the heels of recent confirmations by United Bank for Africa (UBA), Fidelity Bank and First Bank that they had met their new capital requirements after final clearance of their latest capital raisings.
Nigeria currently has 44 deposit-taking banks across various licence categories.
Sources yesterday said the apex bank was weighing the most feasible and least impactful final exit plan for the round off of the banking recapitalisation.
A highly placed source said the apex bank would shortly unfold “conclusive plans” for the resolution of at least three banks under its management.
The source said one of the banks with a legacy of core Southwestern operations and a strong presence in the Lagos market might be considered for a change in status from national to regional bank.
At least seven other banks were said to be weighing the option of scaling down their license from national to regional bank, given the concentration of their operations and the almost equal ubiquitous advantage offered by Nigeria’s expansive digital banking.
Another bank, which currently holds an international banking license, indicated over the weekend that it could be scaling down to a national banking license in the immediate period before the deadline, while pursuing further recapitalisation to boost its capital base and regain its international banking authorisation.
The apex bank was said to have consented to an unencumbered two-way movement along the banking categorisation line, allowing banks to scale down or scale up their licenses once they provide verified evidence of the required minimum capital base.
The apex bank categorises banks into three broad categories – international, national, and regional – based on their financial strength.
Investment banking sources said many banks were still exploring the remaining window of opportunities for special placements, with ongoing discussions with high networth individual and institutional investors.
Market pundits expected such special placements to cluster within the next seven weeks.
Under the recapitalisation guidelines, beyond raising funds, banks are required to subject their new equity funds to capital verification before the clearance of the allotment proposal and release of the funds to the bank for onward completion of the offer process and addition of the new capital to its capital base.
The CBN is the final signatory in a tripartite capital verification committee that included the Securities and Exchange Commission (SEC) and the Nigeria Deposit Insurance Corporation (NDIC).
The committee is saddled with scrutinising new funds being raised by banks under the ongoing banking sector recapitalisation programme.
Market sources said the special capital verification and the narrow definition of qualifying capital to nominal equities have continued to moderate the ability of banks to source funds.
But most analysts said they expected no major upset in the ongoing recapitalisation.
“Many banks have actually met the recapitalisation requirements. Many banks, I mean, over 20 banks have met the requirements.
“So, I think good progress has been made, and I’m really confident that there is not likely to be a major issue, given the progress that has been made so far,” a team lead for a well-respected think-tank said yesterday.
Comparing the current banking recapitalisation to the 2004-2005 period, when several banks were forced into mergers and acquisitions and many liquidated, the team lead said this “is much better and reassuring”.
In March 2024, the CBN released its circular on review of minimum capital requirement for commercial, merchant and non-interest banks.
The apex bank increased the new minimum capital for commercial banks with international affiliations, otherwise known as mega banks, to N500 billion; commercial banks with national authorisation, N200 billion and commercial banks with regional license, N50 billion.
Others included merchant banks, N50 billion; non-interest banks with national license, N20 billion and non-interest banks with regional license will now have N10 billion minimum capital.
The 24-month timeline for compliance ends on March 31.
Under the new minimum capital base, CBN uses a distinctive definition of the new minimum capital base for each bank category, such as the addition of share capital and share premium, as opposed to the previous use of shareholders’ funds.
While the apex bank has not released any provisional list of banks that have met the new minimum capital requirements, official listing reports at the Nigerian Exchange (NGX), banks’ financial statements and public disclosures on capital raisings showed that first-tier banks, which control some three-quarters of the industry, have met their recapitalisation targets.
These included Guaranty Trust Bank, Access Bank, Zenith Bank, United Bank for Africa (UBA), First Bank of Nigeria and Fidelity Bank. Other banks that have met the new capital thresholds were Jaiz Bank Plc, Wema Bank, Ecobank Nigeria, Stanbic IBTC Bank, Citibank and Standard Chartered Bank among others.
