Bank mergers are on the horizon in Nigeria, as the Central Bank of Nigeria (CBN) has recently announced a significant increase in the minimum capital requirements for banks. This move is aimed at strengthening the banking sector and ensuring financial stability in the country.
In a circular issued to all commercial, merchant, and non-interest banks, the CBN revealed that the minimum capital base for commercial banks with international authorization has been raised to N500 billion from N50 billion in 2005. Additionally, the minimum capital requirements for banks with National Spread, Regional, Merchant Banks, National Non-Interest Banks, and Regional Non-Interest Banks have also been increased.
All banks are required to meet these new minimum capital requirements within 24 months, starting from April 1, 2024, and ending on March 31, 2026. The CBN emphasized the importance of banks maintaining adequate capital to enhance their resilience, solvency, and ability to support the growth of the Nigerian economy, especially in the face of macroeconomic challenges and external shocks.
This decision by the CBN is in line with its mandate to promote a safe, sound, and stable banking system, as outlined in the Banks and Other Financial Institutions Act (BOFIA) 2020. The increase in minimum capital requirements is a proactive measure to ensure the strength and stability of the banking sector in Nigeria.
It is worth noting that back in 2005, the capital requirement for an international banking license was N50 billion, while national banks were required to have a minimum capital of N25 billion. The recent adjustment in minimum capital requirements reflects the CBN’s commitment to enhancing the resilience and capacity of banks to support the Nigerian economy.
Overall, this move towards higher minimum capital requirements is expected to lead to bank mergers and acquisitions in Nigeria as banks work towards meeting the new regulatory standards. This development will not only strengthen the banking sector but also contribute to the overall stability and growth of the Nigerian economy.