Nigerian Banks Allocate N222 Billion for Cybersecurity Upgrades Amid New Capital Requirements
As Nigeria’s banking sector faces increasing challenges with cybersecurity, five major banks have earmarked substantial funds for enhancing their technological infrastructure. This strategic investment comes in response to new capital requirements set by the Central Bank of Nigeria (CBN), which mandates a significant increase in capital for financial institutions.
In response to the CBN’s directive issued in late March, which requires commercial banks with international licenses to boost their capital to N500 billion, national banks to N200 billion, and regional banks to N50 billion, these banks have initiated capital-raising measures. The apex bank granted financial institutions a two-year window to meet these new thresholds through additional capital raises, mergers, acquisitions, or adjustments in licensing.
According to PricewaterhouseCoopers (PwC), there exists a notable capital shortfall of N4.2 trillion across all banking licenses, representing a significant gap that needs to be filled to meet the revised capital requirements. To address this, the banks involved have outlined their plans for deploying the proceeds from their capital raises, focusing heavily on technological and cybersecurity improvements.
1. Guaranty Trust Holding Company (GTCO)
Guaranty Trust Holding Company (GTCO) stands out with the largest allocation for technology investments. The company is offering nine billion ordinary shares priced at N44.50 each, aiming to raise approximately N400.50 billion. Of the net proceeds amounting to N392.49 billion, GTCO plans to invest about N98.50 billion (26.6%) in upgrading its technology infrastructure. This includes significant expenditures on core banking applications, hardware infrastructure, network architecture, and data center optimization. Additionally, N15 billion (4.1%) will be dedicated to information security and fraud prevention technologies.
2. Access Holdings
Access Holdings has also made substantial provisions for technological enhancements. From its rights issue, which aims to raise N343.09 billion, the bank has allocated 20% of the net proceeds—equivalent to N68.62 billion—for IT infrastructure upgrades. This budget includes N41.17 billion for network infrastructure and N27.48 billion for cybersecurity enhancements. The remaining funds will support local and international business expansion, underscoring the bank’s commitment to both growth and security.
3. Zenith Bank
Zenith Bank plans to direct 20% of the net proceeds from its offering—around N99.27 billion—towards technological advancements. Specifically, the bank will invest N19.85 billion in various technology upgrades, including N8.93 billion for computer hardware and servers, N3.97 billion each for software licenses, registration, network infrastructure improvements, and N2.98 billion for cybersecurity solutions.
4. Fidelity Bank
Fidelity Bank, which has already completed its capital raise, is investing approximately N19.01 billion in IT infrastructure, representing 20% of its net proceeds. This investment will cover N9.03 billion for cybersecurity capabilities, N7.60 billion for software licenses and hardware, and N2.38 billion for further network infrastructure improvements. The focus on cybersecurity reflects the increasing importance of protecting financial technology systems from threats.
5. FCMB Group
FCMB Group has allocated the smallest share of its budget to technology, totaling N16.22 billion, which is 15% of the net proceeds. Of this amount, N11 billion will be used to upgrade IT infrastructure, and N5.23 billion will be dedicated to strengthening cybersecurity measures. Despite being the least among the five banks, this investment is crucial for maintaining the bank’s technological resilience.
The heightened focus on cybersecurity comes in the wake of a recent increase in cyber-attacks targeting financial institutions, which have led to significant financial losses and legal repercussions. For instance, GTBank recently faced an attempted cyber breach, but reassured customers that no data compromise occurred. Such incidents underscore the critical need for robust cybersecurity measures.
The International Monetary Fund (IMF) has highlighted the escalating risks associated with cyber incidents. The IMF’s Global Financial Stability Report indicated that extreme losses from cyber-attacks have surged, with potential damages reaching $2.5 billion since 2017. This includes not only direct financial losses but also significant indirect costs such as reputational damage and the need for security upgrades.
In addition to their technology investments, the reviewed banks are also set to spend approximately N22.94 billion on costs related to their capital offerings. These expenses encompass underwriting fees, legal and accounting services, marketing, distribution, and other related costs, contributing to the overall capital raise of N1.06 trillion.
The proactive steps taken by these banks to invest in technology and cybersecurity reflect their commitment to meeting regulatory requirements while addressing the growing threat landscape. By strengthening their technological infrastructure, these institutions aim to safeguard their operations and customer data, ensuring resilience in an increasingly digital financial environment.
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