21 November 2015, Lagos – Nigeria’s central bank has given three commercial banks until June 2016 to recapitalise after they failed to hit a minimum capital adequacy rate of 10 per cent, it said in a report on its website.
The central bank did not name the banks but said they were from the group of 14 in Africa’s biggest economy that have licenses to operate as regional and national lenders, with respective capital bases of 10 billion naira ($50 million) and 25 billion naira.
With a number of Nigerian banks having postponed moves to raise fresh funds, the central bank said it was monitoring the three lenders’ recapitalisation plans, and that 10 others with international status met the 15 percent minimum capital rate for that category of bank at the end of June.
The recapitalisation schedule, contained in a report dated Oct. 30, only came to light on Friday.
Nigerian lenders have been shoring up their balance sheets in preparation for adopting stricter international requirements that analysts say could erode capital ratios by between 100 and 400 basis points to near the regulatory minimum of 15 percent.
Meanwhile, poor capital conditions at home due to slowing economic growth have weakened domestic markets, analysts say.
Last week, the central bank told commercial lenders to double provisions on performing loans to 2 percent to build adequate buffers against unexpected losses, as liquidity ratios fall.
It said lower revenues for government and oil companies due to plunging crude prices have led to unsecured exposures for banks that are likely to increase credit risk and loan losses.
Ratings agency Moody’s said this week it expected non-performing loans (NPLs) to rise above 5 percent but remain below 10 percent over the next two years as the weaker naira increases the risk of dollar loans and suppresses bank capital.
NPLs in Nigeria’s banking sector rose to 4.65 percent at the end of June due to a fall in asset quality following a devaluation of the naira and amid rising inflation, the central bank said in the report.
Stanbic IBTC last week said it had doubled its non-performing loan ratio to 8.8 percent. The Nigerian unit of South Africa’s Standard Bank, was also planning to raise fresh funds.
Pan-African bank Ecobank and Nigeria’s Skye Bank have both suspended plans to raise fresh equity owing to weak market conditions and slower loan growth.
Wema Bank, which suspended plans partly because of the naira weakness, said on Thursday it would resume a share sale next year and has started a process to raise $100 million worth of naira bonds after getting approval to switch from a regional to a national bank.
*Chijioke Ohuocha – Reuters