Nigeria Content Online

A
transformation of the Nigerian banking landscape is imminent in the
next few months as banks get set to adjust to the review of the
universal banking model unveiled by the Central Bank of Nigeria (CBN)
in March.

The
reforms, for which the Central Bank expects inputs from operators, were
designed as part of its strategic initiatives for reforming the
Nigerian financial system to “enhance the quality of banks, ensure
financial system stability, and promote the evolution of a healthy
financial sector.”

The
guidelines, which were outlined in a circular signed by J. O. Ajewole,
acting director of banking supervision of the CBN, stated that the new
universal banking licence would be issued to institutions to operate
monoline banking and specialised banking operations.

For
the monoline banking, there would be national and regional banks, while
for the specialised banks, institutions would be allowed to operate
non-interest banking, microfinance banking, and primary mortgage
institutions.

Categorisation

National
banks would operate in Nigeria only with a minimum capital of N25
billion, while those with an eye on the international market would need
to muster N100 billion. Regional banks with a minimum capital of N15
billion, will only operate in minimum of five, and maximum of 10
contiguous states, in addition to having the word ‘regional’ in its
name.

Both
categories of banks are to have, as part of capital adequacy, a minimum
qualifying capital to risk weighted assets ratio of 10 percent, with a
single obligor limit of not more than 20 percent of shareholders’ fund.

National
banks will also be permitted to take current, savings and term
deposits, provide finance or credit facilities, deal in foreign
exchange, and act as a settlement bank. Regional banks can also perform
all these functions, except that they cannot act as settlement banks.

So
far, only First Bank, with N337.4 billion minimum capital, UBA with
N336 billion, Diamond Bank, with N104.8 billion, Guaranty, with N195.1
billion, Zenith, with N337.8 billion, and Access, with N185 billion,
have qualified to operate international banking licence based on the
current minimum capital base.

Banks
with foreign affiliation may naturally fit into this category. Stanbic
IBTC, with a shareholders’ fund of N80.5 billion, is part of the
Standard Bank Group of South Africa, while Standard Chartered Nigeria
is part of the Standard Chartered Group based in the United Kingdom.
Ecobank Nigeria will leverage on the strength of its holding company,
Ecobank Transnational Incorporated with headquarters in Togo, while
Citi will also bank on the strength of its parent company based in New
York.

Other players

Only
Wema had so far indicated interest to obtain a regional banking
licence. According to Tunde Olofintila, the head of corporate
communications, the bank, which has had its recapitalisation deadline
extended to 30 September, said it will shrink the size of its
operations to reflect that status. “A few of our branches will have to
go. Maybe 16 or 17 out of 154 branches,” Mr. Olofintila said.

Unity
Bank, the other bank with a similar deadline extension, has said it
will retain its national banking licence. The bank is currently raising
funds from the primary market through a rights issue, while it plans to
get additional funds from the Asset Management Corporation of Nigeria
(AMCON).

Currently, other banks, including the eight rescued banks, have
shareholders fund below the requirements to operate as international
players. The Central Bank said the banks would be given 12 to 15 months
transitional period within which to adopt a new holding structure that
would incorporate the unbundling of the current banking structure. This
will entail the breakup of the activities of banks under the universal
banking regime into distinct and separate financial business lines, for
which specific licences must be obtained.