Report Says Only 17 out of 24 Banks Will Survive as CBN Sets Tough Targets for Commercial Banks
- A new report has said that Nigerian banks might be pruned down to 17 out of the current 24
- The report by Ernst and Young stated that the current move of the CBN to raise the capital base of the banks will see them merge
- The CBN had said it would require commercial banks in Nigeria to recapitalize to support a $1 trillion economy
Legit.ng’s Pascal Oparada has reported on tech, energy, stocks, investment, and the economy for over a decade.
A new report from Ernst and Young, a United Kingdom-based accounting firm, says 17 out of 24 banks in Nigeria will meet the capital requirement from the Central Bank of Nigeria (CBN) if raised 15 times from its current N25 billion.
The report says options available to banks outside CBN requirements include mergers and outright acquisitions.
Source: UGC
Nigerian banks sound as of 2023
The report acknowledged the financial soundness of the banks, which shows that Nigerian banks are safe and resilient as of 2023.
The report says the recent plan by the CBN to raise the capital base of banks will lead to a series of mergers and acquisitions, as was the case during the last recapitalization move in 2005.
The last recapitalization saw the number of banks in Nigeria reduced to 25 from 89.
The report said:
“In a worst-case scenario, i.e., given a capital multiplier of 15, about 17 out of 24 banks would not meet the new minimum capital.”
Ernst and Young noted that the plan to recapitalize the banks was based upon the recent naira devaluation last year.
CBN asks banks to recapitalize
It explained that the naira was N132 per dollar as of the last recapitalization compared to the current exchange rate of N1,400.
Reports say that, as of 2005, the recapitalization amounted to $188.2 million, which has dropped to a mere $18.4 million using the current exchange rate.
The CBN governor, Olayemi Cardoso, had stated in November last year that the new move is to support Nigeria’s targeted $1 trillion economy.
Cardoso said the proposed raise is based on the observation that most banks lack the required capital base to back a $1 trillion GDP economy envisioned by the Nigerian government.
Banks send messages on transaction alternatives
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The damaged cables, which happened on Thursday, March 14, 2024, affected subsea cable providers and disrupted internet traffic in most parts of Africa.
Reports say the damage affected major undersea cables near Abidjan in Cote d’Ivoire, also affecting submarine communications cables, including the West Africa Cable System (WACS), the Africa Coast to Europe (ACE), MainOne, and SAT3
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Source: Legit.ng
