Four major Nigerian banks are grappling with the implications of the Central Bank of Nigeria’s (CBN) stringent recapitalisation policy, potentially leading to the loss of their brand identities.
An investigation revealed that these banks are deeply concerned following the CBN’s recent approval of the acquisition of Unity Bank.
This move is aimed at preventing another bank failure, a scenario the CBN is keen to avoid under its new regulatory regime.
The CBN’s recapitalisation directive, issued on March 28, 2024, requires commercial, merchant, and non-interest banks in Nigeria to significantly strengthen their capital bases by April 1, 2026.
The policy stipulates that banks must meet minimum capital requirements exclusively through paid-up capital and share premiums—essentially, funds directly contributed by shareholders and additional investments exceeding the nominal value of shares.
Under the new guidelines, commercial banks with international licenses must raise their capital base to N500 billion, while national banks are required to meet a threshold of N200 billion.
Banks operating with regional licenses must secure a minimum of N50 billion.
To achieve these targets, the CBN has provided three recapitalisation options: private placements, rights issues or offers for subscription; mergers and acquisitions; and the upgrade or downgrade of license authorisation.
However, adherence to these methods is non-negotiable, as the CBN has made it clear that no alternative approaches will be accepted.
Despite having submitted their recapitalisation plans, the CBN appears unconvinced about the viability of the strategies proposed by the four banks in question.
Sources close to the CBN suggest that these banks might struggle to maintain their current identities, with two banks considering downgrading to regional licenses and the other two facing challenges in retaining their national status.
One of the banks, a longstanding institution with deep roots in the South-West, remains optimistic about retaining its national license.
However, there are growing indications that the bank may be forced to revert to a regional license, a status it held before its elevation to a national license eight years ago.
The bank recently raised N40 billion through a rights issue, bringing its total capital to N55 billion, still short of the required N200 billion.
Another bank has been hit hard by a recent downgrade from Fitch Ratings, which lowered its Long-Term Issuer Default Rating (IDR) to ‘CCC’ from ‘B-‘, and its National Long-Term Rating to ‘B+(nga)’ from ‘BBB(nga)’.
Fitch also downgraded the bank’s Viability Rating (VR) to ‘CCC’ from ‘b-‘, citing concerns about a prolonged breach of the bank’s total capital adequacy ratio (CAR) and uncertainty about the timeline for restoring compliance.
Fitch’s report underscored the precarious situation, noting that the bank’s future hinges on robust internal capital generation and the swift execution of its recapitalisation plan, as agreed upon with the CBN.
The situation is equally dire for a third bank, which was rescued by the CBN in 2022.
The bank is reportedly struggling to find a suitor willing to take over, largely due to concerns about the acquisition of a troubled bridge bank it bought several years ago.
According to sources within the bank, the fear of job losses now outweighs concerns about losing the bank’s identity, with employees anxious about the potential fallout from an impending merger or acquisition.