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Naira Scarcity: Zenith Bank Shuts Down Operation In Branches

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Zenith Bank has closed some of its branches in the Federal Capital Territory, FCT, and some states of the country due to alleged attacks on its staff and network.

NAN correspondent who monitored some of the bank’s branches in the FCT, and environs and other states on Tuesday, reports that they were under locks.

At Zenith Bank Check-Point branch along Nyanya-Mararaba Road, both the gate and the ATM Gallery of the bank were locked and no customers were seen in the vicinity.

An official of the bank who preferred anonymity said that some of the bank’s branches were also closed due to lack of the new naira notes.

The official said that many of their branches across the country were attacked by customers who were unable to withdraw the new notes from their accounts.

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READ ALSO: naBuhari Meets Emefiele, Tambuwal, Others Over Scarcity Of Naira Notes

NAN reports that some video clips on social media showed how the staff of the bank escaped from the attacked branches by scaling fences to escape mob attacks from customers.

Meanwhile, some customers of the bank have taken to social media to lament their ordeal.

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CBN Raises Capital Base For Mega Banks To N500bn

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Barely 48 hours after restating the need to increase the capital base of Deposit Money Banks for improved productivity, the Central Bank of Nigeria has announced new guidelines on its recapitalisation policy for banks in the country.

The new guidelines were disclosed in a statement signed by its Acting Director, Corporate Communications, Sidi Ali, in Abuja on Thursday.

She said the apex bank had directed commercial banks with international authorisation to increase their capital base to N500bn and national banks to N200bn.

According to the acting CBN director, commercial banks with national licences must meet a N200bn threshold, while those with regional authorisation are expected to achieve a N50bn capital floor.

Similarly, non-interest banks with national and regional authorisations will need to increase their capital to N20bn and N10bn, respectively.

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The CBN’s move came two days after the Monetary Policy Committee hinted that it would change the capital base of the nation’s banks.

At the press briefing that followed the 294th MPC meeting on Tuesday, the CBN Governor, Olayemi Cardoso, urged DMBs to expedite actions to increase their capital base to strengthen the financial system against potential risk.

In its meeting, the committee noted that to guard against risk, commercial banks in the country should accelerate their recapitalisation efforts.

Cardoso said, “The MPC also reviewed developments in the banking system and noted that the industry remains safe, sound, and stable. The committee thus called on the bank to sustain its surveillance and ensure compliance of banks with existing regulatory and macro-potential guidelines.

“The MPC also enjoined the banks to expedite actions on recapitalisation to strengthen the system against potential risks in an increasingly globalised world.”

READ ALSO: FULL LIST: 31 States Owe CBN N340bn Bailout Funds

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However, the latest CBN policy directive specifies that commercial banks with international authorisation are now required to shore up their capital base to N500bn.

The current capital base is stratified based on the type of banking licence – banks with regional, national, and international licences are currently expected to maintain the minimum capital bases.

The proposed increase in the capital base comes nearly two decades after the CBN’s 2004 banking reform, which increased the then-prevailing capital base from N2bn to N25bn.

The 2004 banking reform was characterised by massive mergers and acquisition activities, ultimately reducing the number of banks in the country from 89 to 25.

The PUNCH had reportrd last year that Deposit Money Banks’ chief executive officers and other top executives had begun moves to raise fresh capital to bolster their respective institutions’ capital base through preliminary merger and acquisition talks.

Recall that in November 2023, Cardoso, at the 58th Annual Bankers’ Dinner organised by the Chartered Institute of Bankers of Nigeria, announced plans by the apex bank to carry out a fresh round of banking recapitalisation for the Deposit Money Banks.

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He said the policy was part of its efforts to strengthen its capacity to support Nigeria’s drive to become a $1tn economy by 2026.

At the dinner, Cardoso said, “Despite the challenging global and local economic environment, Nigeria’s financial sector has demonstrated resilience in 2023 with key indications of financial soundness largely meeting regulatory benchmarks.

“Stress test conducted on the banking industry also indicates its strength under mild to moderate scenario on sustained economic and financial stress. Although there is room for further strengthening and enhancing resilience to shocks.

READ ALSO: JUST IN: CBN Sells Forex To BDCs At N1,251/$1

“Therefore, there is still much to be done in fortifying the industry for future challenges. The economic agenda of President Bola Ahmed Tinubu’s mandate has set an ambitious goal of achieving a GDP of $1tn over the next seven years.

“Attaining this target necessitates sustainable and inclusive economic growth at a significantly higher pace than current levels. It is crucial to evaluate the adequacy of our banking industry to serve the envisioned larger economy.

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“It is not just about its current stability. We need to ask ourselves, can Nigerian banks have sufficient capital relative to the finance system needed in servicing a $1tn economy in the near future, in my opinion, the answer is no, unless we take action. As a first test, the central bank will direct banks to increase their capital.”

Earlier in March, a report by Ernst and Young indicated that at least 17 out of the existing 24 Deposit Money Banks might be unable to meet the Central Bank of Nigeria’s capital requirement if it is increased from its current N25bn.

The new report, titled ‘Navigating the Horizon: Charting the Course for Banks amid Plans for Recapitalisation’ noted some banks might depend on different recapitalisation options, which include mergers and acquisitions, initial public offerings, placements and/or right issues and undistributed profit (retained earnings) despite the fact that financial soundness indicators show that Nigerian banks were largely safe and resilient as of 2023.

“On this basis, a worst-case scenario given a 15x capital multiplier for 24 banks will be considered based on the type of banking licenses held. We have benchmarked the current capital of these banks against the current capital requirement and four recapitalization scenarios,” it noted.

In spite of the possible disruption, the apex bank has gone ahead with it’s drastic move.

A circular signed by the Director, Financial Policy and Regulation Department, Mr. Haruna Mustafa, to all commercial, merchant, and non-interest banks and promoters of proposed banks emphasised that all banks were required to meet the minimum capital requirement within 24 months commencing from April 1, 2024, and terminating on March 31, 2026.

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To enable them to meet the minimum capital requirements, the CBN urged banks to consider injecting fresh equity capital through private placements, rights issues and/or offers for subscription, Mergers and Acquisitions, and/or upgrade or downgrade of license authorisation.

Furthermore, the circular disclosed that the minimum capital shall comprise paid-up capital and share premium only. It stressed that the new capital requirement shall not be based on the Shareholders’ Fund.

READ ALSO: CBN’S Incomplete Exhibits Stalls Emefiele’s Trial Over Alleged $6m Procurement Fraud

“Additional Tier 1 Capital shall not be eligible for meeting the new requirement. Notwithstanding the capital increase, banks are to ensure strict compliance with the minimum capital adequacy ratio requirement applicable to their license authorisation.

“In line with extant regulations, banks that breach the CAR requirement shall be required to inject fresh capital to regularise their position,” it added.

The CBN circular said the minimum capital requirement for proposed banks shall be paid-up capital, adding that the new minimum capital requirement shall apply to all new applications for banking licenses submitted after April 1, 2024.

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It noted that the CBN would continue to process all pending applications for banking licenses for which a capital deposit had been made and/or an Approval-in-Principle had been granted.

However, it said that the promoters of such proposed banks would make up the difference between the capital deposited with the CBN and the new capital requirement no later than March 31, 2026.

In an earlier interview with our correspondent, the Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, welcomed the move to increase banks’ capital base, adding that the current capital base was grossly inadequate.

He said, “The minimum capital requirements of the banking industry need to be reviewed in light of the considerable loss of value amid depreciating domestic currency. During the banking consolidation of 2004, the minimum capital requirement for banks was raised from N2bn to N25bn. The revised capital requirement was equivalent to $187m. Today, the same N25bn is the equivalent of just $32.5m.”

Also, Uche Uwaleke, a Professor of Capital Markets at Nasarawa State University, urged the CBN not to coerce banks into increasing their capital base, as was the case during the last recapitalisation drive; rather, they should be incentivised.

The idea of recapitalisation of banks is a welcome one. Capital is needed to finance big-ticket projects, especially when the government targets a $1tn economy in a few years. But I think the strategy should be somewhat different from the approach adopted in 2005. It should be more about incentives than coercion,” he said.

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Meanwhile, the CBN said all banks are required to submit an implementation plan (clearly indicating the chosen option(s) for meeting the new capital requirement and various activities involved with their timelines) no later than April 30, 2024.
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JUST IN: CBN Increases Interest Rate To 24.75%

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The Monetary Policy Committee of the Central Bank of Nigeria has today concluded its two-day meeting for March 2024.

This meeting marks the second MPC meeting for the year 2024 and also the 294th meeting of the CBN.

The MPC at the end of today’s meeting elected to hike the MPR by 200 basis points.

The Committee voted as follows: Raise the MPR by 200bps to 24.75 from 22.75 per cent
Increase the asymmetric corridor to +100bps/-300 basic points.

READ ALSO: JUST IN: CBN Sells Forex To BDCs At N1,251/$1

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Retain the Cash Reserve Ratio of Deposit Money Banks at 45 per cent and Adjust the CRR of Merchant banks from 10 per cent to 14 per cent.

The CBN retains a liquidity ratio of 13 per cent.

Details later…

 

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JUST IN: CBN Sells Forex To BDCs At N1,251/$1

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The Central Bank of Nigeria (CBN) has issued a circular to Bureau De Change (BDC) operators informing them that they sold $10,000 to each BDC at a rate of N1,251 per US dollar.

Nairametrics reports that the CBN, in a circular, instructed each BDC to sell the dollars to eligible customers at a rate not exceeding 1.5% above the purchase price.

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It reads: “We refer to our letter to you referenced TED/DIR/CON/GOM/001/071 in respect of the above subject wherein the CB approved a second tranche of sale of FX to eligible BDCs.

“We write to inform you of the sale of $10,000 to each BDC at the rate of N1,251/$1. The BDCs are to sell to eligible end users at a spread of NOT MORE THAN 1.5 per cent above the purchase price.”

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