Two of Nigeria’s largest banks, Access Holdings and Zenith Bank, are the first to secure enough fresh capital even as Fidelity Bank, FCMB need to raise more to meet the N500 billion Central Bank of Nigeria (CBN) capital requirement for an international license.
This is according to Fitch Ratings in a report on the Nigerian banking sector released on February 12. Fitch notes that First HoldCo, United Bank for Africa, and Guaranty Trust Holding Company are taking a phased approach after recently raising capital and have received shareholder approval to begin raising more to meet the N500 billion requirement.
First HoldCo’s and United Bank for Africa’s recent rights issues are also awaiting final regulatory approval.
Tier-2 Lenders Fidelity, FCMB Need To Raise More Capital
Fidelity Bank and FCMB Group have completed initial capital raisings but will need to raise more to maintain their international licenses, according to Fitch. “As second-tier banks, they must raise significantly more capital relative to their balance sheets than larger banks. They have extraordinary general meeting approval for this, although they could consider downgrading to a national license as they each have just one foreign subsidiary,” Fitch said.
Other smaller banks like Ecobank Nigeria Limited (ENG) and Jaiz Bank needed only small capital injections to meet their requirements and have already achieved compliance.
Fitch says Union Bank of Nigeria (UBN), which is also in breach of its 10% Capital Adequacy Ratio (CAR) requirement, and third-tier banks have generally been slower to raise capital. Wema Bank has shareholder approval to raise enough capital to retain its national license and plans to launch the process in April, while Coronation Merchant Bank recently received board approval.
In March 2024, the Central Bank of Nigeria announced a significant increase in paid-in capital requirements (share capital plus share premium) for commercial, merchant, and non-interest banks.
Banks have three ways to comply – through equity injections, M&A, and downgrading their licence authorisation. The capital raisings are contributing to a recovery in capitalisation from the impact of the naira devaluation, which put pressure on capital ratios and increased US dollar credit concentration risks.
