A new report, shared by Punch, suggests that as many as 17 out of the existing 24 Deposit Money Banks in Nigeria may face challenges meeting the Central Bank of Nigeria's (CBN) capital requirement if it is increased from the current N25 billion.
The report, titled "Navigating the Horizon: Charting the Course for Banks amid Plans for Recapitalisation" by Ernst and Young, indicates that if the CBN raises the capital base of commercial banks in the country by 15-fold, only seven banks would likely survive.
While the CBN governor has not specified the magnitude of the proposed hike in the capital base, the report assumes various scenarios based on current macroeconomic conditions. In a worst-case scenario with a capital multiplier of 15, about 17 out of 24 banks would not meet the new minimum capital requirement.
The CBN's consideration to increase the minimum capital base of banks is part of its efforts to strengthen their capacity to support Nigeria's drive to become a $1 trillion economy by 2026. This proposed increase comes nearly two decades after the CBN's 2004 banking reform, which saw the capital base raised from N2 billion to N25 billion and led to massive mergers and acquisition activities, reducing the number of banks in the country from 89 to 25.
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