Bank Recapitalisation: Report Projects N4trn Inflow To Meet CBN Target
As deposit money banks set sail to meet the 24-month deadline to boost their capital base as directed by the Central Bank of Nigeria (CBN), foremost rating agency, Agusto, has projected an inflow of circa N4 trillion into the system at the end of the exercise. Agusto, while reviewing the directive in a report, said the proposed recapitalisation exercise had some merits given the massive naira devaluation since the last regulatory induced recapitalisation exercise was implemented in 2004.
“In our opinion, the recapitalisation exercise is necessary to provide the funding needed to drive the $1 trillion economy the current administration is trying to achieve. Based on the experience of the last regulatory-induced recapitalisation exercise, we believe new sectors will be created while some existing industries will be expanded as the banks seek to generate returns for the enlarged capital base. “Given the information in the available financial statements, none of the banks have paid-up capital above the proposed minimum.
“However, when we consider the ₦10 billion raised by Jaiz Bank Plc (a non-interest bank which requires a relatively less stringent paid-up capital requirement) through a private placement in March 2024, it is the only bank with paid-up capital exceeding the proposed regulatory minimum.
“Thus, we anticipate an inflow of circa ₦4 trillion to meet the new capital regulation. We anticipate significant pressure on the CBN to use the total shareholders’ funds for the computation of regulatory capital or at least to include retained earnings. “Should the retained earnings be used for the computation, we expect a reduction in the capital inflow to circa ₦1.5 trillion,” it added. According to Agusto, “we believe the tier one banks will successfully raise the required capital given their strong franchise value, market share and consistent dividend payout to shareholders
