A recent Banking Sector FY 2024 Outlook by CardinalStone Securities has indicated that Nigerian banks might be required to boost their capital base, with potential figures ranging from N181.85 billion for a regional banking license to N909.27 billion for an international banking license.
The projection is based on the possibility of the Central Bank of Nigeria (CBN) reverting to the capital base to GDP ratios set in 2005, which ranged from 0.04% to 0.22%.
However, achieving a $1 trillion GDP in the next seven years could necessitate even higher capital base requirements.
The report highlighted a significant decline from the 2005 recapitalization exercise, with current capital requirements ranging from 0.00% to 0.01% of GDP in USD terms as of 2024.
In 2005, an international banking license required a capital base of N50 billion, translating to $380 million, while a national banking license required N25 billion ($190 million), a regional banking license required N10 billion ($80 million), and a merchant banking license required N15 billion ($110 million).
Using the current exchange rate, an international banking license could imply a capital base of N342.9 billion. In contrast, a national banking license could suggest N171.5 billion, a regional banking license of N72.2 billion, and a merchant banking license of N99.3 billion.
Regardless of the basis for the recapitalization exercise chosen by the CBN, it is noted that most Nigerian banks are well-positioned to meet the challenge.
As of September 2023, Nigerian banks collectively held a capital base of about N11 trillion, with major banks such as Zenith Bank, UBA, Access Holdings, FBN Holdings, and GTCO reporting substantial capital bases.
