Nigeria Industry Research: Banking

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Regulatory Update: Nigerian Banks are set to transition to Basel III Standards
  • Nigeria Industry Research: Banking
  • Year : Jun 2022
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Summary

Most Nigerian banks meet the expected capital and leverage requirements. However, Basel III would compel banks to prioritise earnings retention over discretionary capital distributions in the near term.

• We expect increased issuances of additional tier 1 and tier 2 capital instruments as well as greater demand for investment grade corporate debt securities by banks over the medium term. These developments will likely deepen the domestic bond market.

• Full implementation of Basel III is anticipated to improve the banking sector’s overall resilience. The new regulation would curtail excess growth, foster more prudent capital management and enhance banks’ liquidity position.

Additional Information

The Basel III regulatory regime would likely bring with it increased issuances of additional tier 1 and tier 2 capital instruments by Nigerian banks, in both domestic and international capital markets. This is particularly applicable to those banks with high growth strategies, looking to diversify into other areas of financial services and markets across Africa, with Access Bank being the first mover.

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