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.
There are various financial institutions under the supervisory purview of the Central Bank of Nigeria, namely: the deposit money banks, finance companies, primary mortgage banks, development finance institutions and microfinance banks.
GCR’s ratings on Islamic Finance institutions (IFI) and sukuk are not subject to distinct ratings criteria, despite very specific features. Our core framework and sector specific criteria, alongside the below addendum, will therefore be used to frame the ratings on IFI. However, GCR does recognise that emphasis will be placed on such factors as liquidity management, risk concentrations and collateralisation when analysing IFI.
In November 2020, the ‘Banks and Other Financial Institutions Act’ (“BOFIA”) was signed into law by President Muhammadu Buhari, replacing BOFIA 1991. BOFIA 2020 is the primary legislation for the regulation of all banks and financial institutions in Nigeria. It defines the powers of the Central Bank of Nigeria (“CBN”), stipulates the licensing requirements for banks and other financial institutions and regulates their operations