Lagos, Nigeria (VOICE OF NAIJA)- RENAISSANCE Capital (RenCap) has warned that Nigerian banks may need to raise more than ₦1.7 trillion in fresh capital and restructure their holding company operations if the Central Bank of Nigeria (CBN) implements its proposed Financial Holding Company (HoldCo) capital framework.
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In a report titled Nigerian Banks: More Capital, Declining Returns, published on July 16, the investment bank said the proposed requirement for HoldCos to maintain capital equivalent to 120 per cent of the combined paid-up capital of their subsidiaries could dilute shareholder value, reduce returns on equity and increase capital pressures across the banking sector.
RenCap noted that the proposal comes as banks’ profitability begins to moderate following the record earnings recorded in recent years.
