The new requirements will be stricter in terms of what funding qualifies as capital and will also require lenders to create “capital conservation” and “counter-cyclical” buffers, the Abuja-based Central Bank of Nigeria said in an emailed response to questions. The rule seeks to protect the nation’s banks “against shocks emanating locally and from abroad” by increasing the level of regulatory capital and the quality of the assets, it said.
According to Bloomberg, the regulator is aligning itself with a global accord known as Basel III three years after a contraction in Nigeria’s economy spurred authorities to delay the implementation of tougher capital rules. It also comes after policy makers in 2013 spurned some requirements drawn up by the Basel Committee on Banking Supervision.
Nigerian authorities migrated banks to a new accounting standard known as IFRS 9 last year to improve disclosure by forcing lenders to provide for existing losses as well as those that might occur in the future. While the average capital-adequacy ratio for the industry rose to 12.1 percent in June from 10.2 percent at the end of 2017, some banks said the transition shaved as much as 200 basis points off their capital.