Nigeria’s Central Bank Must Pause Banking Recapitalization Until the Economy Stabilizes

Caution there for Nigeria’s central bank: “A new report from Ernst and Young has sent shockwaves through the Nigerian banking sector, revealing that 17 out of 24 banks could potentially fall short of meeting the capital requirement set by the Central Bank of Nigeria (CBN) if it is increased by 15-fold from its current N25 billion.”

Good People, the central bank must watch carefully before bringing another vector into the Nigerian economy. Yes, we do not want a further reduction in competition. While Zenith Bank can meet any new minimum paid-up share capital for a national commercial banking license at 15x on the old N25 billion, banks like Unity Bank may not.

Zenith Bank had rains last year, and possibly hit more than N1 trillion on PBT, even as Unity Bank was recording losses, and is expected to record losses in some quarters this year. Yes, it was all about choices made!

Simply, Nigerian banking is emerging into two classes: big or dying. I think those guys in CBN are smart enough to avoid anything that would engineer more chaos in the system.  We ask them to pause any recapitalization exercise until we can stabilize the economy!

“While the CBN governor gave no indication as to the magnitude of the proposed hike in the capital base, we have assumed what the proposed increment will be based on three different scenarios underpinned by current macroeconomic conditions. On the back of that, we were able to determine the number of banks (across the three license types) that may fall below the new minimum capital thresholds.

“In a worst-case scenario, i.e., given a capital multiplier of 15, about 17 out of 24 banks would not meet the new minimum capital,” the report states.

About 17 out of 24 Banks Would not Meet the New CBN’s Minimum Capital – Ernst & Young

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