A report by CardinalStone Securities, a non-bank securities trading firm, has projected that Nigerian commercial banks with international banking licence may be required to to raise their capital base to over N900 billion.
The firm, in its Banking Sector FY 2024 Outlook titled, “Nigerian banks: On the cusp of a new dawn”, said the Central Bank of Nigeria (CBN) may ask commercial banks to boost their capital, with projections indicating an increase ranging from N181.85 billion for regional banking licences to N909.27 billion for international banking licenses.
CBN Governor, Olayemi Cardoso, had said the apex bank would require lenders to raise more capital in order to support the Federal Government’s vision to grow the economy to $1 trillion.
It based the projection on the prospects of the CBN returning to the dollar ratios of capital bases-to-GDP set in 2005. These ratios ranged from 0.04 per cent for regional banks to 0.22 per cent for commercial banks, according to the report.
The report further stated that the goal of reaching a $1 trillion economy in seven years may even necessitate higher capital base requirements.
It noted that there has been a substantial decline from 2005’s recapitalisation exercise, as the requirements which ranged from 0.04 per cent to 0.22 per cent of the GDP in dollar terms as of 2005, have dropped to a range of 0.00 per cent to 0.01 per cent of the GDP in dollar terms as of 2024.
“Banks may be expected to boost capital base to between N181.85bn (for regional banks) and N909.27bn (for international banks), given 2024 real GDP of $472.6bn and exchange rate of N841.61/$ as at December 20, 2023.
“In this case, the majority of banks are likely to scale this hurdle, with some tier-1 banks even boasting capital bases above 2.1x of the threshold implied by this scenario analysis and with Zenith Bank at the peak,” the report read in part.
It further said the ambitious target of reaching an economic size of $1tn in seven years may require an even higher range for capital base requirements. Tier-1 international banks like Zenith Bank and UBA are likely to surpass the implied thresholds.
“We will continue to monitor developments in this space to see what the apex bank eventually settles for as well as the structure of the directives and timelines,” it added.