Ernst & Young Global Limited (EY) states that future capital restrictions will force banks in Nigeria to pay out heavy dividends.
Due to the recapitalization initiative of the Central Bank of Nigeria (CBN) and the deduction of retained earnings from the minimum capital requirement, banks in Nigeria now require at least N4 trillion in capital to stay in operation.
EY thinks that giving dividends will improve the financial standing of shareholders, but dividend payments have to adhere to the CBN’s due process guidelines.
In order to transfer profits to shareholders, banks offer dividends, which may draw in investors looking for steady income.
Paying out dividends on time can help improve a bank’s standing and boost shareholder loyalty. Access Bank increased its final dividend from N1.30 in 2022 to N1.80 in 2023.
The final dividend of Zenith Bank was set at N3.5, up N0.6 from N2.9 in 2022.
In order to maintain minimum share capital of N500 billion, N200 billion, and N50 billion, respectively, international, national, and regional banks must adhere to new capital requirements imposed by the apex bank for Nigerian banks.
The goal of the economy is to reach $1 trillion by 2026, and the recapitalization of these institutions will inject almost N4 trillion into it.
This endeavor aims to fortify the industry’s resilience in the face of historically elevated inflation, depreciation of the naira, and a feeble economy.
Retained earnings were not included in the CBN’s definition of share capital, which is limited to the common capital and share premium of the banks.
Approximately four of the thirty-three banks have either begun to raise capital through rights offerings or are in the process of doing so.
Though they could not be as prevalent as they were during the banking consolidation of 2004–2005, the majority of M&A activity might be restricted to smaller banks that might find it difficult to obtain the necessary capital on their own.
