CBN Proposes Tougher Rules, Banks May Need N1.7 Trillion

The Central Bank of Nigeria (CBN) has proposed new regulations that could require financial holding companies (HoldCos) to maintain capital at least 20% above the combined paid capital of their subsidiaries. This change could lead to Nigeria's largest banks needing to raise an additional N1.7 trillion in capital.

According to a report by Renaissance Capital, the proposed regulatory changes may significantly weaken shareholder returns and reduce profits, imposing fresh capital obligations on banks already facing moderate profits. Major banks such as UBA, Fidelity Bank, and Zenith Bank are projected to require substantial fresh capital to comply with the new rules.

For instance, UBA may need to raise approximately N416.01 billion, while Fidelity Bank could require N188.83 billion. The report also highlights that the average return on equity in the banking sector has declined, suggesting that raising additional equity under these conditions could further dilute shareholder returns.