Financial and economic experts have stressed that the current recapitalisation push is a necessary step for economic stability but caution that poor regulation and macroeconomic instability could derail its success.

The experts, who spoke separately with the News Agency of Nigeria (NAN) in Ibadan on Wednesday, expressed support for the ongoing recapitalisation of Nigerian banks.

According to them, the recapitalisation drive was largely necessitated by the erosion of banks’ capital base, following sustained naira depreciation, inflationary pressures, and the expanding size of the Nigerian economy.

Oyo State Chairman of the Nigerian Economic Society (NES), Dr Alarudeen Aminu, said the current recapitalisation was aimed more at restoring the real value of banks’ capital rather than expanding their capacity.

“The recent recapitalisation has more to do with addressing the shortfall in the real value of the capital of our banks as a result of naira devaluation,” Aminu said.

He noted that while the Central Bank of Nigeria’s (CBN) decision to raise minimum capital requirements was a positive step, recapitalisation alone would not guarantee financial system stability.

“Have we been able to address inflation, exchange rate instability and other headwinds? Recapitalisation just for the sake of increasing capital may not be enough,” he warned.

Aminu recalled that the 2004–2005 recapitalisation exercise exposed governance weaknesses in the sector, leading to fund diversion, excessive stock market speculation, and eventual bank failures.

“Banks were awash with funds, yet investment did not come as expected. Some directors diverted funds and banks were even pumping money into the stock market by buying their own shares.

“A related aspect of the reason behind the review of banks’ capital base is to make Nigerian banks much more competitive and comparable to their regional and global peers,” he said.

Also speaking, Acting Head of the Department of Banking and Finance, University of Ibadan, Dr Ifeayin Onwuka, said that strong capital buffers were essential for banks to withstand economic shocks and finance large-scale investments.

“Equity capital is a buffer. When a bank has robust capital, it can weather shocks much better than when it doesn’t,” Onwuka said.

The don explained that weak capitalisation previously limited Nigerian banks’ ability to undertake big-ticket transactions, adding that Nigeria’s aspiration of becoming a one-trillion-dollar economy required strong and globally competitive banks.

“Before the 2004 recapitalisation, the total capitalisation of all Nigerian banks was less than one major bank in South Africa. Nigeria cannot afford to play second fiddle on the continent,” he said.

Onwuka noted that recurring recapitalisation was inevitable due to inflation and exchange rate depreciation, stressing that banks should proactively raise capital in line with Basel I, II and III requirements.

“Banks should be raising capital on their own without waiting for regulatory directives if they want to play big,” he added.

Meanwhile, a financial consultant, Mr Tunde Adepeju, said that the recapitalisation was timely, given the growing volume of financial transactions and banks’ central role in driving industrial and commercial activities.

“The economy has grown beyond what it was five or ten years ago. If banks don’t have enough to lend out to businesses, especially production and industrial businesses, it will be a tough one,” Adepeju said.

He described the CBN’s differentiated capital thresholds for international, national and regional banks as fair, noting that most banks had already met the new requirements through rights issues and private placements.

“The failure of one bank can have a negative effect on the economy. That is why recapitalisation, mergers, and acquisitions are necessary to protect depositors and ensure financial stability,” Adepeju said.

They agreed that while recapitalisation was critical, it must be supported by sound macroeconomic management, effective regulation, and strict oversight to avoid a repeat of past failures.