A transformation of the Nigerian banking landscape is imminent in the next few months as banks get set to adjust to the review of the universal banking model unveiled by the Central Bank of Nigeria (CBN) in March.
The reforms, for which the Central Bank expects inputs from operators, were designed as part of its strategic initiatives for reforming the Nigerian financial system to “enhance the quality of banks, ensure financial system stability, and promote the evolution of a healthy financial sector.”
The guidelines, which were outlined in a circular signed by J. O. Ajewole, acting director of banking supervision of the CBN, stated that the new universal banking licence would be issued to institutions to operate monoline banking and specialised banking operations.
For the monoline banking, there would be national and regional banks, while for the specialised banks, institutions would be allowed to operate non-interest banking, microfinance banking, and primary mortgage institutions.
Categorisation
National banks would operate in Nigeria only with a minimum capital of N25 billion, while those with an eye on the international market would need to muster N100 billion. Regional banks with a minimum capital of N15 billion, will only operate in minimum of five, and maximum of 10 contiguous states, in addition to having the word ‘regional’ in its name.
Both categories of banks are to have, as part of capital adequacy, a minimum qualifying capital to risk weighted assets ratio of 10 percent, with a single obligor limit of not more than 20 percent of shareholders’ fund.
National banks will also be permitted to take current, savings and term deposits, provide finance or credit facilities, deal in foreign exchange, and act as a settlement bank. Regional banks can also perform all these functions, except that they cannot act as settlement banks.
So far, only First Bank, with N337.4 billion minimum capital, UBA with N336 billion, Diamond Bank, with N104.8 billion, Guaranty, with N195.1 billion, Zenith, with N337.8 billion, and Access, with N185 billion, have qualified to operate international banking licence based on the current minimum capital base.
Banks with foreign affiliation may naturally fit into this category. Stanbic IBTC, with a shareholders’ fund of N80.5 billion, is part of the Standard Bank Group of South Africa, while Standard Chartered Nigeria is part of the Standard Chartered Group based in the United Kingdom. Ecobank Nigeria will leverage on the strength of its holding company, Ecobank Transnational Incorporated with headquarters in Togo, while Citi will also bank on the strength of its parent company based in New York.
Other players
Only Wema had so far indicated interest to obtain a regional banking licence. According to Tunde Olofintila, the head of corporate communications, the bank, which has had its recapitalisation deadline extended to 30 September, said it will shrink the size of its operations to reflect that status. “A few of our branches will have to go. Maybe 16 or 17 out of 154 branches,” Mr. Olofintila said.
Unity Bank, the other bank with a similar deadline extension, has said it will retain its national banking licence. The bank is currently raising funds from the primary market through a rights issue, while it plans to get additional funds from the Asset Management Corporation of Nigeria (AMCON).
Currently, other banks, including the eight rescued banks, have shareholders fund below the requirements to operate as international players. The Central Bank said the banks would be given 12 to 15 months transitional period within which to adopt a new holding structure that would incorporate the unbundling of the current banking structure. This will entail the breakup of the activities of banks under the universal banking regime into distinct and separate financial business lines, for which specific licences must be obtained.
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