VenturesNow

Report: Only 7 Nigerian banks can meet apex bank’s recapitalization requirement

Published

2 months ago

March 17, 2024

A recent report by financial advisory firm, Ernst and Young, shows that at least 17 out of the existing 24 Deposit Money Banks may 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”, claims only only seven banks may survive capital base of commercial banks in the country by 15-fold from the current N25bn.

In multiple statements, CBN Governor Olayemi Cardoso has indicated that the central bank would take into account raising the minimum capital base of banks in the nation as part of its efforts to bolster their ability to support Nigeria’s ambition to become a $1 trillion economy by 2026.

Banks holding regional, national, and international licences are currently required to maintain a minimum capital base of N10 billion, N25 billion, and N50 billion, respectively. The capital base is currently stratified based on the type of banking licence.

The global financial services firm stated in the report that while financial soundness indicators show that Nigerian banks were generally safe and resilient as of 2023, some banks may depend on different recapitalization options, such as mergers and acquisitions, initial public offerings, placements and/or right issues, and undistributed profit (retained earnings).

Based on the report, a sequence of mergers and acquisitions, similar to those that occurred during the previous recapitalization exercise in 2004/2005, will result from the CBN’s recent plan to enhance banks’ capital bases.

The report read partly, “The recent plan by the CBN to increase the capital base of banks could again lead to M&A activities but not as widespread as was the case in 2004/2005 given the relatively solid financial positions of the banks today as well as the occurrence of several M&A activities in the banking sector over the past 10 years.

“While the CBN governor did not indicate the magnitude of the proposed hike in the capital base, we have assumed what the proposed increment will be based on three different scenarios underpinned by current macroeconomic conditions. On the back of that, we were able to determine the number of banks (across the three licence types) that may fall below the new minimum capital thresholds.

“In a worst-case scenario, i.e., given a capital multiplier of 15, about 17 out of 24 banks would not meet the new minimum capital.”

“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.

About 20 years have passed since the CBN’s 2004 banking reform, which raised the then-current capital base from N2 billion to N25 billion. This is when the proposed increase in the capital base would take place.

Massive merger and acquisition activities characterised the 2004 banking reform, which ultimately led to the country’s bank count dropping from 89 to 25.

VenturesNow

Nigeria received $1bn tax income from Shell in 2023

Published

4 hours ago

May 8, 2024

Ifeoluwa Dada

Shell Nigeria, a multinational oil company, claims that through the operations of Shell Petroleum Development Company of Nigeria Limited and Shell Nigeria Exploration and Production Company of Nigeria Limited, it exclusively paid $1.09 billion in corporate taxes and royalties to the Nigerian government in 2023.

According to the numbers released in the recently released 2023 Shell Briefing Notes, SNEPCo remitted $649 million, while the SPDC paid $442 million.

Similar payments made by the two firms in 2022 totalled $1.36 billion, according to a statement from Abimbola Essien-Nelson, the company’s manager of media relations.

“These payments are Shell exclusive and do not include those made by our partners,” said SPDC Managing Director and Country Chair, Shell Companies in Nigeria, Osagie Okunbor.

Okunbor explained, “Shell companies in Nigeria will continue to contribute to the country’s economic growth through the revenue we generate and the employment opportunities we create by supporting the development of local businesses.”

He continued by saying that Shell has been an investor in Nigeria for more than 60 years and that the Briefing Notes provide an update on the state of the companies’ operations in Nigeria for 2023, including SPDC, SNEPCo, Shell Nigeria Gas, and Daystar Power.

He claimed that the studies demonstrated how the businesses kept driving advancement, collaborating closely with communities and stakeholders to support socio-economic growth and offer more affordable, environmentally friendly energy options.

“It is important to emphasise that Shell is not leaving Nigeria and will remain a major partner of the country’s energy sector through its deep-water and integrated gas businesses. Our collective focus remains on delivery of safe operations and care for our people,” Okunbor maintained.

VenturesNow

Zimbabwe’s new gold-backed currency now official unit of exchange

Published

18 hours ago

May 7, 2024

Ifeoluwa Dada

Zimbabwe’s Treasury says that the newly introduced gold-backed currency is the official unit of exchange for transactions. It also stated on Tuesday that laws requiring businesses to utilize the official rate would be released soon.

The Zimbabwe Gold (ZiG) has been stable on the official market since its inception in early April, but it has had a shaky start on the black market, where dealers are demanding a premium of 65% of the official rate to purchase dollars.

Additionally, some stores are charging customers who pay in the new currency—while the ZiG is being rejected by informal traders—a premium over the market rate, which is fixed at ZiG 13.6 per US dollar.

“To ensure orderly pricing, the Government will soon be introducing the necessary regulations to ensure that no exchange rate other than the official rate will be used for the pricing of all goods and services,” Finance Minister Mthuli Ncube said in a statement.

Since the ZiG’s inception, the government has been working to keep it afloat; this month, officials launched a campaign against unlicensed foreign exchange dealers.

Zimbabwe, located in southern Africa, abandoned the Zim dollar last month after it lost 70% of its value since the beginning of the year. This is the country’s fourth effort to introduce a local currency in ten years.