Renaissance Capital (RenCap) has issued a warning that Nigerian banks could be compelled to raise more than N1.7 trillion in fresh capital and undertake significant restructuring of their group operations. This would occur if the Central Bank of Nigeria (CBN) proceeds with its proposed Financial Holding Company (FHC) framework.

In a report titled “Nigerian Banks: More Capital, Declining Returns” published on July 16, 2026, RenCap highlighted that the apex bank’s proposal for holding companies to maintain at least 20% capital above the sum of its subsidiaries’ paid-up capital could substantially dilute shareholder value and reduce returns on equity.

Proposed 20% Buffer: A Value-Destructive Play

RenCap argues that this proposed additional buffer is the most consequential aspect of the reforms, potentially becoming highly value-destructive for shareholders. The investment bank stated, “We think the additional 20% capital requirement is excessive given that the current capital requirement, that the holding company’s capital is equal to the sum of subsidiaries’ capital, is sufficient for the Holdco to be the lender of last resort to the subsidiaries.”

The report emphasizes that since a HoldCo is a non-operating entity, capital held at that level generates little to no return. RenCap added, “Since HoldCo is a non-operating subsidiary, holding that much capital is a value-destruction play to providers of capital.” The impact would be more severe for banking groups with extensive international operations, which may be forced to adopt more complex holding company structures.

Significant Capital Requirements for Major Banks

RenCap estimates that under its base-case scenario, several banking groups would require substantial capital injections to comply. Among existing HoldCo structures, Access Holdings faces the largest capital requirement at N656.04 billion.

Other estimated requirements include First HoldCo at N135.03 billion, FCMB Group at N112.84 billion, GTCO at N56.02 billion, and Stanbic IBTC Holdings at N11.84 billion. Access Holdings would need to raise capital equivalent to nearly 50% of its market capitalization, making it the most impacted among existing HoldCos.

The draft framework contains no exemptions for banking groups operating outside formal HoldCo structures. Section 4.6 of the proposed guidelines requires closely linked entities to be consolidated under a single non-operating holding company, potentially bringing institutions such as Zenith Bank, United Bank for Africa (UBA), and Fidelity Bank within the scope of the new requirements.

The report estimates their potential capital needs as follows: UBA at N416.01 billion, Fidelity Bank at N188.83 billion, and Zenith Bank at N166.88 billion. Measured against market capitalization, UBA would face the largest burden at approximately 23.1%, followed by Fidelity Bank at 15.3%, while Zenith Bank’s requirement would represent about 3.8% of its market value.

New Guidelines and Moderating Profitability

The proposed guidelines represent the most significant review of Nigeria’s holding company framework since the original rules were introduced in 2014. The CBN stated its review was necessitated by gaps observed over a decade, including governance weaknesses, compliance inconsistencies, and operational inefficiencies.

Under the draft framework, banking groups would be limited to two hierarchical layers and required to adopt one of two approved structures. Groups with international operations would operate under a two-tier structure, while primarily domestic groups would adopt a single-tier model. A significant change is the requirement for foreign subsidiaries to be owned directly by the holding company rather than by the operating bank.

RenCap warned that the timing of the proposed reforms could further pressure shareholder returns. The average Return on Average Equity (ROAE) of Nigerian banks declined to 20.63% in FY 2025 from peak levels of 31.03% recorded during FY 2023 and FY 2024. Raising additional equity to meet the 20% buffer would prove both difficult and expensive in an environment of moderating earnings, further diluting group ROAE.

A major issue identified is the treatment of excess capital if banks downgrade their operating licenses. Under current recapitalization requirements, international banks were required to raise N500 billion, while national banks need N200 billion. Such downgrades could create significant excess capital within banking subsidiaries, and whether banks can recover and redeploy this capital will determine the overall impact on shareholders.

RenCap's Recommendations for CBN

To mitigate the potential negative impact while preserving the CBN’s broader objectives, RenCap urged the regulator to reconsider several aspects of the draft framework. The investment bank recommended that the CBN remove the additional 20% HoldCo capital buffer, permit the recall and redeployment of excess capital following license downgrades, clarify the treatment of solo capital adequacy requirements at the HoldCo level, and relax proposed restrictions on intra-group financing and shared-service arrangements.

These changes, according to RenCap, would allow the CBN to achieve stronger group-level supervision and more effective ring-fencing without imposing unnecessary costs on shareholders. Last week, a group of shareholders had also urged the CBN to reconsider the proposed capital requirement, warning of repeated capital raising, investor fatigue, and weakened confidence in the banking sector.