Olayemi Cardoso, the Governor of the Central Bank of Nigeria (CBN), has said that excluding retained earnings from banks’ recapitalisation move put banks on a comparable playing field.
Speaking at the ongoing CEO’s forum hosted by BusinessDay Media Limited, he stated that the move also aligned with the apex bank’s goal of ensuring transparency in the banking system.
“With respect to retained earnings, it helps to build comparability because with retained earnings, accounting rules allow you to calculate certain things and take certain things out. The Central Bank felt that it’s better to have something easily determinable outside of retained earnings for comparability,” he stated.
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Earlier in 2024, the CBN announced an upward review of Nigeria’s minimum capital requirements for commercial, merchant, and non-interest banks. The minimum capital base for banks with international authorisation was increased to N500 billion.
The minimum capital base for commercial banks holding national authorisation is N200 billion, and for those with regional authorisation, it is N50 billion. Merchant banks will also require a minimum capital requirement of N50 billion, while non-interest banks holding national and regional authorisations must adhere to new minimum requirements of N20 billion and N10 billion, respectively.
However, the CBN excluded retained earnings from the capital raise for banks, asking banks to raise fresh investments. Cardoso noted that this policy contributes to the apex bank’s focus on improving transparency in the banking system.
“We also must move to a more transparent banking system, and this contributed to it,” he said. Cardoso also stated that the CBN hopes to build a banking system that contributes more to the country’s overall GDP.
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“The contribution of the banking system to GDP is modest compared to our peers. We believe this is a means to address that issue. We are opening the banks up to providing different kinds of services as opposed to one.”
“We’re hoping to build a better, stronger, and resilient system, which can’t be done overnight,” he said. “As far as I can see, banks have enough time to prepare for this. They also have two years to implement this.”
