The Central Bank of Nigeria (CBN) has made a bold move to strengthen the country’s financial system by increasing the minimum capital requirement for banks. In a recent podcast on the ‘Banking Sector Recapitalisation Programme 2024′, Haruna Mustafa, Director of the Financial Policy and Regulatory Department at CBN, explained the rationale behind this decision.
Last month, CBN announced that all Nigerian banks must raise their capital by at least 100%, giving them a two-year timeline to meet the new requirement. However, some industry analysts have raised concerns about the exclusion of banks’ retained earnings from this calculation.
In response to the criticism, Mustafa cited the Bank’s and Other Financial Institutions Act of 2020, which grants CBN the authority to determine banks’ capital requirements and the timeline for compliance. The central bank emphasized that this move, effective as of April 1, 2024, is aimed at bolstering the resilience of the banking sector and supporting the Federal Government’s goal of achieving a $1 trillion economy.
By excluding retained earnings, CBN is encouraging banks to inject fresh capital into the system, ensuring a more robust and stable financial environment. This strategic decision is part of a broader effort to enhance the overall health and sustainability of Nigeria’s banking sector.
As the deadline approaches, Nigerian banks are gearing up to meet the new capital requirements and position themselves for future growth and success. The impact of this initiative is expected to be far-reaching, setting the stage for a stronger and more prosperous economy in the years to come.
