Tuesday, July 16, 2024

Raising minimum capital requirement for commercial banks will strengthen Nigerian stock market — Don

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Ibrahim Ramalan
Ibrahim Ramalan
Ibrahim Ramalan is a graduate of Mass Communications from the Ahmadu Bello University (ABU) Zaria. With nearly a decade-long, active journalism practice, Mr Ramalan has been able to rise from a cub reporter to the exalted position of an editor; first as Arts Editor with the Blueprint Newspapers before resigning in 2019; second and presently as an Associate Editor of the Daily Nigerian online newspaper. He can be reached via ibroramalan@gmail.com, or www.facebook.com/ibrahim.ramalana, or @McRamalan on Twitter.
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A financial expert, Prof. Uche Uwaleke, has commended the Central Bank of Nigeria, CBN, for raising the minimum capital requirement for Nigerian banks.

Mr Uwaleke, a Professor of Capital Market, and the Director, Institute of Capital Market Studies at the Nassarawa State University, Keffi, said this in an interview with the News Agency of Nigeria on Friday, in Abuja.

According to him, it is a welcome development that will help strengthen the country’s financial system and a potential boost to the stock market.

He said that, in view of Naira devaluation following unification of exchange rates, the new calibrated minimum capital requirements was commendable, unlike the uniform capital base of N25 billion stipulated in 2005.

He said that the two years period allowed was sufficient to implement the recapitalisation.

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According to him, a number of banks had already started the process of recapitalisation before now.

“I believe that First Bank, UBA, GTB, Access Bank and Zenith Banks with international authorisation will have no difficulty meeting this requirement.

“The stock market (Option 1) presents the most feasible option as few will likely go the Merger and Acquisition route.

“Shareholders’ funds comprise paid-up share capital plus reserves. It was permitted in 2005 but now disallowed possibly from the experience of the last exercise,” he said.

Mr Uwaleke said that Access Bank had already announced that it was raising N365 billion through rights issue.

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He suggested a different Cash Reserve Ratio, CRR, for the different banks according to their categories.

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“Since the new capital base was based on the type of authorisation, the CBN may consider applying a differentiated CRR according to the category of licence,” he said.

Mr Uwaleke added that, “In view of the young age of Non Interest banks in Nigeria, they should be allowed a longer period, say, three years, to meet the minimum capital requirement.”

The CBN, on Thursday, increased the minimum capital requirement for banks with national licences from N25 billion to N200 billion.

The apex bank also increased capital requirement for banks with regional licences from N15 billion to N50 billion , and those with international licences from N100 billion to N500 billion.

According to a statement issued by the Acting Director, Corporate Communications Department of the bank, Hakama Sidi-Ali, the new minimum capital for merchant banks will be N50 billion.

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Mrs Sidi-Ali also announced that the new requirements for non-interest banks with national and regional authorisations are N20 billion and N10 billion.

It said that all banks were required to meet the new capital requirements within 24 months beginning from April 1, 2024 and terminating March 31, 2026.

The move is coming days after the Monetary Policy Committee, MPC, meeting of the CBN.

At the MPC meeting, the CBN Governor, Yemi Cardoso, urged Nigerian banks to expedite action on the recapitalisation of their capital base in order to strengthen the financial system.
NAN

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