See Nigerian banks set for N100 billion recapitalization – Eandel

See Nigerian banks set for N100 billion recapitalization

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Nigerians may bid bye to both Unity and Wema banks. The reason is that they are not prepared for the current overhauling that is taking place in the banking industry, as directed by the Central Bank of Nigeria. However, it is also clarified that 13 banks are ready for the recapitalization.

At a conservative round figure of N100 billion only 2 national banks listed on the stock market, Unity and Wema bank, are on the verge of a merger or acquisition to meet up with the recapitalization exercise.

The balance sheets of the 13 listed banks on the Nigerian Stock Exchange (NSE) seem to be ready for the recapitalization exercise the Central Bank of Nigeria might be mulling. All but Unity and Wema Bank have an equity position in excess of the anticipated N100 billion capitalization requirement.

Godwin Emefiele, CBN governor had earlier in the year stated that in the next five years, CBN will pursue a programme of recapitalizing the banking industry so as to position Nigerian banks among the top 500 in the world. Banks will therefore be required to maintain higher level of capital, as well as, liquid assets in order to reduce the impact of an economic crisis on the financial system.

This higher level of capital has been anticipated to be around N100 billion based on CBN’s rhetoric on the $200 million capital requirement placed in 2001.

Emefiele also noted that “when you relate N25 billion in 2001 exchange rate, which was about N100/$1, N25 billion was about $200 million. Today if you relate N25 billion at N360/$1, you can see that it is substantially lower than $75 million.”

New capital requirement at $200 million at an exchange rate of N360/$1 will see these banks required to have nothing less than N72 billion in equity.

Expert analysis show Unity bank with a negative equity position and Wema bank with an equity position of N52.04 billion as at the second quarter of 2019. Sterling bank’s equity position was N10 billion above N100 billion mark as at the end of the second quarter in 2019 and is the only other bank close to the N100 billion territory.

In view of this, the CBN chief says “If CBN goes forth with the recapitalization exercise, Unity bank will definitely be the first Nigerian National bank to feel the pinch. The bank currently has a negative equity position of more than N200 billion.

The bank will need to look for fresh capital in excess of N300 billion to meet any capital requirement change.”

As reported by BusinessDay Online, the list of the remaining 10 banks net assets in ascending order are FCMB N188.72 billion, Fidelity Bank (N202.03 billion), Union Bank (N238.97 billion), Stanbic IBTC (N263.05 billion), United Bank for Africa (N543.22 billion), First Bank (N560.92 billion), Access Bank (N576.47 billion), Guaranty Trust Bank (N603.01 billion), Ecobank (N651.32 billion) and Zenith Bank with a net asset of N819.52 billion.

 

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