In anticipation of the looming April 30, 2024 deadline set by the Central Bank of Nigeria (CBN) for banks to submit their recapitalization plans, several banks have commenced efforts to secure shareholders’ approval for raising additional capital.

Last month, the CBN elevated the capital requirement for banks across the country, providing a two-year window for compliance or exploring alternative measures such as mergers/acquisitions or the possibility of downgrading banking licenses.

Under the new mandate, commercial banks holding international licenses are mandated to maintain a capital base of N500 billion, while their national and regional counterparts are required to have capital bases of N200 billion and N50 billion respectively. Additionally, national non-interest banks saw their capital base raised to N20 billion, and regional non-interest banks to N10 billion. Merchant banks’ capital bases were also increased to N50 billion.

In response, Access Holdings Plc, parent company of Access Bank, became the first to secure shareholders’ approval for additional capital during its second Annual General Meeting (AGM) in Lagos over the weekend. Shareholders endorsed the N365 billion rights issue alongside a N1.80 kobo dividend payment, totaling N2.80 for 2023.

While FBN Holdings, parent of First Bank of Nigeria, had scheduled an Extraordinary General Meeting (EGM) for the end of the month to raise an additional N300 billion, the EGM was unexpectedly canceled over the weekend.

Meanwhile, Zenith Bank is slated to hold its EGM later this week.

Addressing the upcoming capitalization deadline, CBN Governor Dr. Olayemi Cardoso emphasized that banks have ample time to strategize and raise the necessary capital. Speaking at the 2024 Spring Meetings of the International Monetary Fund (IMF)/World Bank, Cardoso highlighted the importance of forward guidance provided by the CBN, stressing the need for banks to align with the apex bank’s intentions regarding the recapitalization exercise.

To meet the increased capital base, Nigerian banks may need to attract over N3 trillion. Options for capital-raising include mergers, acquisitions, or license reclassification, offering banks various avenues to meet regulatory requirements.

However, challenges abound, with most banks facing a capital shortfall. While the top five banks may attract foreign investors to raise the required N500 billion capital, others may explore mergers or license reclassification.

Ayokunle Olubunmi, Head of Financial Institutions at Agusto & Co., noted the complexities involved, emphasizing the importance of strategic partnerships and long-term institutional investors. He highlighted potential challenges in attracting foreign investors, particularly for less profitable banks or those with low capital bases, suggesting a nuanced approach to navigating Nigeria’s banking environment.

As Nigerian banks navigate the path to compliance, strategic planning and stakeholder collaboration will be paramount in ensuring a resilient and thriving banking sector.

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