Legit.ng’s Pascal Oparada has reported on tech, energy, stocks, investment and the economy for over a decade.

The Nigerian banking system is undergoing a significant transformation driven by the Central Bank of Nigeria's (CBN) new minimum capital requirements. 

This recapitalisation exercise, set to conclude by March 31, 2026, aims to strengthen the financial sector, enhance its resilience to economic shocks, and better position it to support Nigeria's economic growth ambitions, including a projected $1 trillion GDP by 2026.

However, analysts have projected that the Tier-1 Banks, which dominate the Nigerian banking landscape, will likely scale the hurdle.

Ishaya Ibrahim and Osas Igho, financial analysts, disclosed that about 10 Nigerian banking brands will most likely scale the recapitalisation hurdle.

These lenders generally have stronger franchise values, larger market shares, and a history of consistent dividend payouts, making them more attractive for capital raising.

According to them, the persistent naira devaluation has put the banks under pressure, as their dollar-based capital ratios have reduced significantly. The recapitalisation is partly a response to this.

“The CBN's new directive specifies that the minimum capital must consist solely of paid-up capital and share premium, excluding other components of shareholders' funds like retained earnings and additional Tier 1 instruments. This stringent definition necessitates fresh equity injections,” Ibrahim said.

Meanwhile, the banks are employing several methods to meet the recapitalisation requirements.

The methods include equity injections, Mergers and Acquisitions (M&As), and license downgrades.

While Tier-1 banks are generally expected to succeed, attracting sufficient investment for all banks, especially in a period of economic uncertainty and a recent CBN dividend ban, could be challenging. 

The dividend ban, though temporary and aimed at increasing capital buffers, has rattled bank stocks and could make capital raising at attractive valuations more difficult for some.

The capital market may experience increased activity, but also potential dilution and downward pressure on share prices due to the significant volume of new shares being issued, Igho stated.

The massive capital injection across the banking sector could lead to a short-term liquidity crunch in the wider economy.

There's a risk that increased capital could lead to more loans concentrated among a few large corporations, with limited trickle-down effects.

Based on current reports and industry analysis, the following banks are most likely to meet the N500 billion minimum capital requirement for international licenses by the March 2026 deadline:

The bank has already been reported to have surpassed the N500 billion threshold with a share capital and share premium of N614.65 billion.

Has also been reported to have surpassed the N500 billion threshold with a share capital and share premium of N594.90 billion.

UBA has a stated commitment to meeting the N500 billion target by Q3 2025, having already raised a significant portion and with plans for further capital raises.

The bank is taking a phased approach and has shareholder approval to raise more capital to meet the N500 billion mark.

The bank is taking a phased approach and has shareholder approval to raise more capital to meet the N500 billion mark.

Although currently trailing some of its peers in terms of paid-up capital and share premium for Nigeria-specific operations, ETI’s large asset base and Pan-African presence give it strong capacity to meet the requirement, with Fitch noting it needed only "small capital injections" in its Nigerian entity.

As a prominent national player with strong financial health, it is expected to meet its national license requirement and potentially consider an upgrade if strategic. 

While its primary focus is currently on the N200bn for a national license, its robust structure suggests the capability to scale up if it chooses an international license.

Fidelity Bank Plc: Has completed initial capital raisings and is projected to return to Tier 1 classification, indicating strong efforts towards meeting the requirement, though it will need to raise significantly more.

Like Fidelity Bank, FCMB has completed initial capital raisings and will need to raise more to maintain its international license. Its proactive steps suggest it is committed to meeting the target.

Wema Bank Plc: 

Wema Bank has shareholder approval to raise enough capital to retain its national license.

While its initial target might be N200 billion for a national license, it's proactive approach and growth trajectory position it well to potentially pursue an international license if its capital-raising efforts exceed expectations or if it opts for a strategic acquisition.

“It's important to note that the list might be influenced by factors such as the success of ongoing capital raising efforts, potential mergers and acquisitions, and any further regulatory adjustments, Igho said.

Legit.ng earlier reported that a new ranking of Africa’s leading tier-1 capital for last year has shown a clear hierarchy, with South African, Egyptian, and Moroccan lenders leading the pack, while Nigeria trails behind.

A new report by Proshare disclosed that the Standard Bank Group led the charge with the most tier-1 capital of $13 billion, followed by National Bank of Egypt, with $7 billion, and Attijariwafa Bank of Morocco with $6 billion in the review period.

However, four Nigerian lenders, First Bank, Access Bank, Zenith Bank, and United Bank for Africa (UBA), made the list, each having tier-1 capital of $2 billion.

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Source: Legit.ng