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CBN raises capital base for mega banks to N500bn, gives compliance deadline

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CBN uncovers $2.4bn foreign exchange scam
CBN Governor Olayemi Cardoso

Barely 48 hours after restating the need to increase the capital base of Deposit Money Banks for improved productivity, the Central Bank of Nigeria has announced new guidelines on its recapitalisation policy for banks in the country.

The new guidelines were disclosed in a statement signed by its Acting Director, Corporate Communications, Sidi Ali, in Abuja on Thursday.

She said the apex bank had directed commercial banks with international authorisation to increase their capital base to N500bn and national banks to N200bn.

According to the acting CBN director, commercial banks with national licences must meet a N200bn threshold, while those with regional authorisation are expected to achieve a N50bn capital floor.

Similarly, non-interest banks with national and regional authorisations will need to increase their capital to N20bn and N10bn, respectively.

The CBN’s move came two days after the Monetary Policy Committee hinted that it would change the capital base of the nation’s banks.

At the press briefing that followed the 294th MPC meeting on Tuesday, the CBN Governor, Olayemi Cardoso, urged DMBs to expedite actions to increase their capital base to strengthen the financial system against potential risk.

In its meeting, the committee noted that to guard against risk, commercial banks in the country should accelerate their recapitalisation efforts.

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Cardoso said, “The MPC also reviewed developments in the banking system and noted that the industry remains safe, sound, and stable. The committee thus called on the bank to sustain its surveillance and ensure compliance of banks with existing regulatory and macro-potential guidelines.

“The MPC also enjoined the banks to expedite actions on recapitalisation to strengthen the system against potential risks in an increasingly globalised world.”

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However, the latest CBN policy directive specifies that commercial banks with international authorisation are now required to shore up their capital base to N500bn.

The current capital base is stratified based on the type of banking licence – banks with regional, national, and international licences are currently expected to maintain the minimum capital bases.

The proposed increase in the capital base comes nearly two decades after the CBN’s 2004 banking reform, which increased the then-prevailing capital base from N2bn to N25bn.

The 2004 banking reform was characterised by massive mergers and acquisition activities, ultimately reducing the number of banks in the country from 89 to 25.

Recall that in November 2023, Cardoso, at the 58th Annual Bankers’ Dinner organised by the Chartered Institute of Bankers of Nigeria, announced plans by the apex bank to carry out a fresh round of banking recapitalisation for the Deposit Money Banks.

He said the policy was part of its efforts to strengthen its capacity to support Nigeria’s drive to become a $1tn economy by 2026.

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At the dinner, Cardoso said, “Despite the challenging global and local economic environment, Nigeria’s financial sector has demonstrated resilience in 2023 with key indications of financial soundness largely meeting regulatory benchmarks.

“Stress test conducted on the banking industry also indicates its strength under mild to moderate scenario on sustained economic and financial stress. Although there is room for further strengthening and enhancing resilience to shocks.

“Therefore, there is still much to be done in fortifying the industry for future challenges. The economic agenda of President Bola Ahmed Tinubu’s mandate has set an ambitious goal of achieving a GDP of $1tn over the next seven years.

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“Attaining this target necessitates sustainable and inclusive economic growth at a significantly higher pace than current levels. It is crucial to evaluate the adequacy of our banking industry to serve the envisioned larger economy. It is not just about its current stability. We need to ask ourselves, can Nigerian banks have sufficient capital relative to the finance system needed in servicing a $1tn economy in the near future, in my opinion, the answer is no, unless we take action. As a first test, the central bank will direct banks to increase their capital.”

Earlier in March, a report by Ernst and Young indicated that at least 17 out of the existing 24 Deposit Money Banks might be unable to meet the Central Bank of Nigeria’s capital requirement if it is increased from its current N25bn.

The new report, titled ‘Navigating the Horizon: Charting the Course for Banks amid Plans for Recapitalisation’ noted some banks might depend on different recapitalisation options, which include mergers and acquisitions, initial public offerings, placements and/or right issues and undistributed profit (retained earnings) despite the fact that financial soundness indicators show that Nigerian banks were largely safe and resilient as of 2023.

“On this basis, a worst-case scenario given a 15x capital multiplier for 24 banks will be considered based on the type of banking licenses held. We have benchmarked the current capital of these banks against the current capital requirement and four recapitalization scenarios,” it noted.

In spite of the possible disruption, the apex bank has gone ahead with it’s drastic move.

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A circular signed by the Director, Financial Policy and Regulation Department, Mr. Haruna Mustafa, to all commercial, merchant, and non-interest banks and promoters of proposed banks emphasised that all banks were required to meet the minimum capital requirement within 24 months commencing from April 1, 2024, and terminating on March 31, 2026.

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To enable them to meet the minimum capital requirements, the CBN urged banks to consider injecting fresh equity capital through private placements, rights issues and/or offers for subscription, Mergers and Acquisitions, and/or upgrade or downgrade of license authorisation.

Furthermore, the circular disclosed that the minimum capital shall comprise paid-up capital and share premium only. It stressed that the new capital requirement shall not be based on the Shareholders’ Fund.

“Additional Tier 1 Capital shall not be eligible for meeting the new requirement. Notwithstanding the capital increase, banks are to ensure strict compliance with the minimum capital adequacy ratio requirement applicable to their license authorisation.

“In line with extant regulations, banks that breach the CAR requirement shall be required to inject fresh capital to regularise their position,” it added.

The CBN circular said the minimum capital requirement for proposed banks shall be paid-up capital, adding that the new minimum capital requirement shall apply to all new applications for banking licenses submitted after April 1, 2024.

It noted that the CBN would continue to process all pending applications for banking licenses for which a capital deposit had been made and/or an Approval-in-Principle had been granted.

However, it said that the promoters of such proposed banks would make up the difference between the capital deposited with the CBN and the new capital requirement no later than March 31, 2026.

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EKEDC migrates 33 additional feeders to Band A

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The Eko Electricity Distribution Company says the Nigerian Electricity Regulatory Commission has approved the migration of 33 additional feeders to Band A under its franchise area.

The feeders are Adeleke Adedoyin, Ajeast, Annex, Army Resettlement, British America Tobacco, CIG, Coker, Dideolu, Droyers, Empire Court, Estate, Etim Inyang, Firro, Freeman, Glover, Heritage, M&K Express, Mega Plaza, Montgomery 1, Moore Road, Nest Oil, NIMR, Nipost, Osborne, Ozumba Mbadiwe, Palace Road, Rocky Estate, Rumens, Smith, Station Feeder (Nitel), Victoria Arobieke, DPR andNitel.

The DisCo disclosed this Friday in a statement made available to our correspondent by the General Manager, Corporate Communications of EKEDC, Babatunde Lasaki.

The Federal Government, through the NERC, had on April 3 announced that subsidy would no longer be paid on the electricity consumed by Band A customers.

From N68 per kilowatt-hour, Band A customers now pay N255/KWh, while others maintain the old tariffs.

Lasaki said customers in these areas would experience “a guaranteed minimum of 20 hours of power supply daily in line with the newly approved Multi-Year Tariff Order”.

He assured customers within the EKEDC network of ongoing efforts to improve the quality of service rendered to them.

He said, “In our bid to serve our customers better, we are looking to even add more feeders to the list of our Band A feeders so that more customers can enjoy a guaranteed 20 hours of power supply daily.

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“It is also our commitment to ensure that customers under other service bands, that is, Bands B to E also enjoy their guaranteed minimum supply hours while we work to improve our power supply”.

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Lasaki added that EKEDC was working to eliminate supply downtime within its franchise area and achieve its goal of a stable and uninterruptible power supply.

He said, “The EKEDC is dedicated to investing more in infrastructural capacity to improve power supply and is working with all stakeholders to ensure a minimum of 20 hours of supply is available to all its customers”.

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Mbah urges FG to complete Enugu int’l trade fair complex

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Enugu chamber of commerce lauds Mbah over security, infrastructure
Enugu State Governor, Dr Peter Mbah

The Enugu State Government has urged the Federal Government to bring to reality its resolve and pledge to build the Enugu International Trade Fair complex to international standard according to its master plan.

Gov. Peter Mbah made the call on Friday in Enugu while declaring open the 35th Enugu International Trade Fair.

The fair, which is being organised by
Enugu Chamber of Commerce Industry Mining and Agriculture (ECCIMA), is themed: “Promoting Made in Nigeria products for global Competitiveness.”

Mbah, represented by his Deputy, Chief Ifeanyi Ossai, noted that for equity, there was a need for the Federal Government to build and complete the fair complex just as it had done in Kaduna and Lagos fair complexes.

According to the governor, we cannot easily explain to our people why this fair complex is not developed, while that of Kaduna and Lagos had been fully built and developed by the Federal Government.

“I charge the Federal Minister, here present, to make a formal memo to the Federal Executive Council for its development. We cannot aviod to wait any longer on this vital economic development move,” he said.

He also called on the chamber and organised private sector in the region to work towards it through executive and legislative lobbying and advocacy as well as media awareness on the matter.

The governor also called on the chamber and other sister chambers in the South-East and South-South regions to open lobby for the opening up of viable waterways commercial businesses and goods movement through the River Niger Port, Ibom Deep Port and Oguta Port among others.

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“This is to facilitate trade and large movement of goods as well as check the excess use of the roads to convey goods, which is more expensive,” he said.

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Mbah said that the state had passed and signed it Electricity Act, which means that very soon it will give licence to private investors to produce electricity in the state.

 

“We know how vital the place of constant and reliable electricity to industrialization and economy growth of our dear state,” he said.

On the theme of the fair, he said that it was apt, adding that it was only through massive productive activities especially goods patronized by Nigerians can lead the country to prosperity.

“It is also good we add quality and value on every made in Nigerian product we are promoting to gain global competitiveness and acceptability,” he said.

The Minister of Innovation, Science and Technology, Chief Uche Nnaji, noted that with its wealth of agricultural and mineral resources, Enugu State is in a prime position to lead the push for products made in Nigeria.

Nnaji said that the state’s potential for various industries, including energy, pharmaceuticals, and building materials, sets the groundwork for substantial economic change and industrial growth.

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He said: “To make the most of this potential, it’s vital for the state to encourage investment and offer financial incentives to businesses. Enugu’s key location and the increasing demand for local products highlight big market opportunities.

“This effort is supported by Presidential Executive Order Number 5 and the goals of my Ministry to use innovation, science, and technology as the main drivers of economic change.

“We are dedicated to improving the quality and appeal of locally made products, demonstrated by our backing of engineering developments and research efforts.”

SEE ALSO:  Mbah urges FG to complete Enugu int’l trade fair complex

In a welcome address, Chief Odeiga Jideonwo, President of Enugu Chamber of Commerce Industry Mining and Agriculture (ECCIMA), called on Federal Government through the CBN to reconsider reviewing downwards, interest rate.

Jideonwo noted that policies of government especially as it affects credit to SMEs should be made to work by using the business associations as buffer for her members that are genuinely in need of credit facilities to expand their business operations.

According to him, now is the time to support the startups/SMEs which will in turn, tackle the issue of unemployment, insecurity, hunger, etc, in our country, for wealth creation.

“There is no gainsaying that this will go a long way to unleash the economy of most states in the Federation and thereby expanding the frontiers of the nation’s economy.

“One of the unique features of the 35th Enugu International Trade Fair, is the presence of the second 1000sqm Marquee Tent designated to accomodate SMEs from Enugu State.

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“All thanks to His Excellency, the Executive Governor of Enugu State, Dr. Peter Ndubuisi Mba for sponsoring the installation of this tent where all SMEs are showcasing their products and services.

“By this, the ingenuity and new ideas in the state would be brought to bear for commercialization. We have also made entry to the Fair complex free to all visitors. This is aimed at driving more traffic into the Fair.

“Interestingly, we have resolved to make this fair a pilot fair to boost our match making strategy to provide a more amenable atmosphere for interface between Researchers, Prototype Innovators and Investors for enhanced linkages to enhance and unleash the industrial sector/SMEs.”

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Transcorp demonstrates robust growth in FY’23 as revenue increases by 47.3%

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…pre-tax profit up by 93.5%

Transnational Corporation Plc has announced its financial results for the year ended December 31, 2023.

The Group achieved substantial growth in its financial indicators, reinforcing its market leadership and strategic positioning.

In its audited results, Transcorp reported significant year-on-year growth, with revenue rising to N197 billion in the year 2023, from N134 billion in 2022, representing a 47.3% increase. The strong performance is further demonstration of the Group’s strategic focus and effective execution.

Highlights of Transcorp group Results:

• FY 2023 Revenue was N197 billion, a significant increase of 47.3%, compared to 2022.

• Operating Expenses saw an increase of 22.6% year on year, totalling N26.9 billion in 2023, reflecting the impact of inflation.

• Net Finance Cost increased by 46% to N22.6 billion, arising from interest on foreign currency loans, that has now been repaid.

• Profit before Tax surged by 93.5%, amounting to N58.8 billion in 2023, compared to N30.4 billion in the same period last year.

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• Profit after Tax improved 91% year-on-year to N32.6 billion in 2023, compared to N17.1 billion in the same period last year.

• Earnings per share of the Group were N40 compared to N19 in 2022.

• Total assets grew by 20%, to N529.9 billion in full year 2023, up from N442.7 billion in December 2022.

In response to the results, Dr. (Mrs) Owen D. Omogiafo, President/Group Chief Executive Officer of Transcorp, commented, “The financial results for 2023 underscore our Group’s strong operational performance and the results of our strategic initiatives. Notwithstanding the strong macroeconomic headwinds in the year, we achieved significant growth in revenue and profits, indicating our ability to navigate a dynamic market landscape effectively. Our primary objectives remain centered on achieving sustainable growth, enhanced operational and technical efficiency, and maximizing value for shareholders.”

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Transcorp is dedicated to its transformation agenda, emphasizing sustained growth and a relentless pursuit of long-term value for shareholders.

Transnational Corporation Plc (Transcorp Group) is one of Africa’s leading, listed Conglomerates, with strategic investments in the power, hospitality, and energy sectors, driven by its mission to improve lives and transform Africa.

Transcorp’s power businesses, Transcorp Power Plc and Transafam Power, provide over 15% of Nigeria’s installed power capacity. Transcorp is committed to developing Nigeria’s domestic energy value chain, through its investments in OPL281. The Group’s hospitality business, Transcorp Hotels Plc owns the iconic Transcorp Hilton Abuja, Nigeria’s flagship hospitality destination, and has launched the digital platform Aura by Transcorp Hotels.

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