Recapitalisation: CBN gives 3 commercial banks June 2016 deadline

The capitalisation deficiency plaguing Nigeria’s banking in­dustry may be far from over as the Central Bank of Nigeria’ (CBN) yesterday gave three commer­cial banks until June 2016 to recapital­ise after they failed to hit a minimum capital adequacy rate of 10 percent.

The development seen as one of the fallouts of the recent implementation of the Treasury Single Account (TSA) by the President Muhammadu Buhari adminis­tration led to the loss of over N1.7trillion of public sector fund from banks’ vaults to a single Federation Account at the Central Bank.

Many also believe that the TSA policy may have left gaps in the accounts of most commercial banks to the extent that most of them are now battling to cover up to scale regulatory checks.

Though the apex bank did not name the banks for fears it may trigger a run on their current deposits, it pointed out they were from the group of 14 banks that have li­censes to operate as regional and national lenders, with respective capital bases of 10 billion naira ($50 million) and N25 billion.

So far, a number of Nigerian banks have postponed moves to raise fresh funds, even as the CBN said it was monitoring the three banks’ 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, was only released 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 Ni­geria’s deposit money banks to double provisions on performing loans to two percent to build adequate buffers against unexpected losses, as liquidity ratios fall.

It said lower revenues for govern­ment and oil companies due to the crash in crude prices have led to unsecured exposures for banks that are likely to in­crease credit risk and loan losses.

Recall that ratings agency, Moody’s, said early this week it expected non-per­forming loans (NPLs) to rise above five 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. Agency report