Nigerian banks could be compelled to raise more than N1.7 trillion in fresh capital if the Central Bank of Nigeria (CBN) implements its proposed Financial Holding Company (HoldCo) framework, according to Renaissance Capital (RenCap).

In a report titled “Nigerian Banks: More Capital, Declining Returns,” the investment bank said the proposal requiring HoldCos to maintain capital equivalent to 20 per cent above the combined paid-up capital of their subsidiaries could significantly erode shareholder value and reduce returns on equity.

RenCap described the proposed capital buffer as excessive, arguing that the existing requirement already provides adequate financial support for subsidiaries during periods of stress. It noted that since HoldCos are non-operating entities, capital held at that level generates little or no return, making the requirement inefficient for investors.

The report estimated that Access Holdings would face the largest capital requirement of N656.04 billion, followed by UBA (N416.01 billion), Fidelity Bank (N188.83 billion), Zenith Bank (N166.88 billion), First HoldCo (N135.03 billion), FCMB Group (N112.84 billion), GTCO (N56.02 billion) and Stanbic IBTC Holdings (N11.84 billion).

RenCap also warned that the reforms would come at a time when profitability across Nigeria’s banking industry is slowing. The average Return on Average Equity (ROAE) declined to 20.63 per cent in 2025, compared with 31.03 per cent recorded in 2023 and 2024.

The report further noted that banks opting to downgrade from international to national banking licences could generate excess capital, adding that the CBN’s decision on whether such funds can be recalled and redeployed would have a major impact on shareholder value.

To minimise the negative effects of the reforms, RenCap urged the CBN to remove the proposed 20 per cent HoldCo capital buffer, allow banks to redeploy excess capital after licence downgrades, clarify HoldCo capital adequacy requirements and ease restrictions on intra-group financing.

The proposed guidelines are part of the CBN’s review of Nigeria’s financial holding company framework, aimed at strengthening governance, improving regulatory oversight and enhancing financial stability across banking groups. Visit www.jocomms.com for more news.