As of February 18, 2025, Nigerian banks are making significant progress towards meeting the Central Bank of Nigeria’s new paid-in capital requirements, which are set to be fully implemented by the end of the first quarter of 2026. Fitch Ratings reports that the ongoing capital raises are supporting the banks’ recovery from the effects of the naira devaluation and are boosting their capitalisation, which in turn positions them for growth. The move reduces the likelihood of major banking sector consolidation.
Thank you for reading this post, don't forget to subscribe!In March 2024, the Central Bank of Nigeria announced higher paid-in capital requirements for commercial, merchant, and non-interest banks. Banks have three main routes to compliance: equity injections, mergers and acquisitions (M&A), and downgrading their licence authorisation. Banks rated by Fitch have made remarkable progress, with most either having already raised capital or having launched plans to do so.
• Access Holdings and Zenith Bank were the first to meet the NGN500 billion capital requirement for an international licence.
• First HoldCo, United Bank for Africa (UBA), and Guaranty Trust Holding Company are proceeding with phased capital raises, having received shareholder approval for further capital raising.
• Fidelity Bank and FCMB Group have completed initial capital raisings but must raise more to maintain their international licences, with the option of downgrading to a national licence if needed.
• Ecobank Nigeria Limited (ENG) and Jaiz Bank have already complied with the capital requirements, although ENG still needs to address its total capital adequacy ratio (CAR) breach.
Fitch also notes that the capital raises have been supported by strong investor interest, ensuring the success of most capital raising efforts. This progress significantly reduces the likelihood of sector-wide consolidation, especially among first- and second-tier banks. However, third-tier banks, such as Union Bank of Nigeria (UBN), have been slower to raise capital. M&A activity and licence downgrades remain a more viable option for these banks.
The successful capital injections have helped the banks recover from the effects of the naira devaluation, alleviating pressure on their capital ratios and reducing risks tied to US dollar credit concentration. These strengthened buffers will help banks mitigate risks arising from regulatory interventions and ongoing naira volatility, all while enabling future business growth.
Despite these positive developments, the capital raisings are not expected to lead to upgrades of Long-Term Issuer Default Ratings (IDRs) for banks rated ‘B-’, as they are still constrained by Nigeria’s ‘B-’ sovereign rating. However, for banks like UBN and ENG, which are rated ‘CCC’, the capital raises could result in Outlook revisions to Positive and, if compliance is restored, potential upgrades in National Long-Term Ratings.
