New CBN capital rules could force banks to raise N972bn in fresh equity – Report

Nigerian bank holding companies may need to raise a combined N971.764 billion in fresh equity if the Central Bank of Nigeria implements its proposed capital framework in its current form. Access Holdings alone accounts for nearly 68 percent of the projected shortfall, according to Renaissance Capital Africa.

The investment firm identified Access Holdings Plc, FCMB Group Plc, First HoldCo Plc, Guaranty Trust Holding Company Plc, and Stanbic IBTC Holdings Plc as the lenders likely to be affected. It said that Access Holdings would need N656.037 billion, followed by First HoldCo with N135.033 billion, FCMB with N112.836 billion, GTCO with N56.019 billion, and Stanbic with N11.839 billion.

How the capital shortfall breaks down

Renaissance Capital said its projections assume the CBN adopts the draft rules without significant changes and allows banks to redeploy excess capital released from subsidiaries that downgrade their international banking licences to national licences, provided those subsidiaries retain enough capital to cover their risks. Access Holdings’ capital coverage ratio is expected to rise from 0.6 times under the current guidelines to 1.2 times under the post-guidelines estimate.

FCMB’s holding company paid-up capital will likely rise from N512.344 billion to N625.179 billion, representing an estimated capital raise of N112.836 billion. First HoldCo’s paid-up capital could increase from N480.616 billion to N615.649 billion, indicating N135.033 billion in additional equity capital. The paid-up capital of its bank subsidiary will stay at N500.027 billion, while that of its non-bank subsidiaries is expected to remain at N13.014 billion. Renaissance Capital did not factor in any paid-up capital for foreign subsidiaries, though it said the sum of all subsidiaries’ paid-up capital could remain at N513.041 billion.

GTCO and Stanbic projections

GTCO’s paid-up capital is estimated to rise from N518.880 billion to N574.899 billion, indicating an estimated capital raise of N56.019 billion. On the other hand, Stanbic’s holding company’s paid-up capital is expected to rise from N255.006 billion to N266.845 billion, marking an estimated capital raise of N11.839 billion. First HoldCo’s holdco capital coverage ratio would rise from 0.9 times to 1.2 times.

The report showed that the sum of all subsidiaries’ paid-up capital will likely fall from N633.119 billion under the current guidelines to N479.082 billion after the proposed guidelines. The paid-up capital of FCMB’s Nigerian bank is expected to stay at N500.500 billion, while the paid-up capital of its non-bank subsidiaries could remain at N8.809 billion and that of its foreign subsidiaries at N11.674 billion. The sum of all subsidiaries’ paid-up capital may therefore remain unchanged at N520.983 billion.

What this means for the naira and investors

A massive equity scramble of nearly N1 trillion could put pressure on the Nigerian capital market and the naira, as banks may need to attract foreign portfolio investors to meet the shortfall. For consumers and businesses, stronger capital bases could mean more resilient banks, but the immediate effect may be a tighter liquidity environment as lenders compete for funds.