ABUJA—IN an apparent move to compel mergers and acquisitions in the banking industry, the Central Bank of Nigeria (CBN) announced yesterday a new policy of a minimum capital base of N25 billion for banks. The current minimum capital base is N1 billion for existing banks and N2 billion for new entrants. At the beginning of the year, the apex bank gave all existing banks till December 31, 2005 to increase their paid-up-capital to N2 billion .
The proposed minimum capital base was the high point of a reform package for the banking industry unfolded by the CBN Governor, Professor Charles Soludo, at an an enlarged Bankers’ Committee meeting, comprising bank’s managing directors and their chairmen, in Abuja, yesterday.
Prof. Soludo speaking on: “Consolidating the Nigerian banking industry to meet the development challenges of the 21st century,” said: “As you are aware, I assumed duties as the Governor of the Central Bank barely one month ago and we are still working out the details of the New Agenda for Repositioning the CBN and the Financial System for the 2lst Century. Our goal is to consolidate and build upon the achievements of the sector especially in the last 10 years and to take the system to greater heights.
“Strengthening and consolidating the banking system will constitute the first phase of the reforms designed to ensure a diversified, strong and reliable banking sector which will ensure the safety of depositors’ money, play active development roles in the Nigerian economy, and be competent and competitive players in the African regional and global financial system. The goal of the reforms is to help you become stronger players, and in a manner that will ensure longevity and hence higher returns to your shareholders over time and greater impacts on the Nigerian economy.
“The first phase of the reform package include: Requirement that the minimum capitalisation for banks should be N25 billion with full compliance before end-December 2005 (that is 18 months notice rather than 12 months normally given in many countries). Only the banks that meet the requirement can hold public sector deposits, and participate in the DAS auction by end 2005. Publish the names of banks that qualify by 31 December 2005; phased withdrawal of public sector funds from banks, starting in July 2004; and consolidation of banking institutions through mergers and acquisitions.”
