Nigeria’s banking sector is undergoing its most significant transformation in nearly two decades. As eight banks have already met new capital requirements and others race toward the 2026 deadline, the recapitalisation represents more than regulatory compliance for the country’s ambitious $1 trillion economy goal, ISAAC CHIBUIFE reports.
Nigeria’s banking sector is undergoing a pivotal transformation as the Central Bank of Nigeria (CBN) advances its ambitious recapitalisation programme, with eight banks already meeting the new capital requirements and others in progress toward the March 31, 2026, deadline.
The development comes as Monetary Policy Committee (MPC) members recently acknowledged continued stability in the banking system, citing stable financial soundness indicators (FSIs) that demonstrate the sector’s resilience under the ongoing recapitalisation.
The CBN Governor, Olayemi Cardoso, has described the recapitalisation programme as fundamental to achieving Nigeria’s ambitious $1 trillion gross domestic product (GDP) target by 2030. At the beginning of the recapitalisation, he had posed a critical question: “Will Nigerian banks have sufficient capital relative to the financial system’s needs in servicing a $1 trillion economy in the near future?”
His answer was unequivocal: “In my opinion, the answer is no unless we take action.” The ongoing recapitalisation is one of the actions taken to reposition the industry to position for big ticket funding and as a force in the industry.
“By empowering banks to extend more credit to MSMEs, we stimulate job creation and boost productivity. Increased capital also enables banks to invest in technology and innovation, key enablers of digital financial services such as mobile money and agent banking. These solutions help bridge geographic and economic gaps, bringing financial services to underserved and remote communities,” Cardoso had noted.
The Policy Advisory Council’s report on the national economy had set the ambitious $I trillion GDP target, with clearly defined priority areas and strategies requiring a well-capitalised banking sector as a crucial foundation. As a strategic support agenda, the CBN launched the two-year recapitalisation exercise on April 1, 2024, following an announcement on March 28, 2024. The programme establishes stringent new minimum capital requirements across different banking categories.
Commercial banks with international licences must maintain N500 billion in minimum capital, while those with national and regional licences require N200 billion and N50 billion respectively. Merchant banks face a N50 billion requirement, while non-interest banks with national licences need N20 billion, and their regional counterparts require N10 billion.
Significantly, a distinctive definition of minimum capital base that includes only paid-up share capital and share premium, excluding other reserves and retained earnings, has been adopted. The approach means nearly all banks must raise fresh capital, despite many having shareholders’ funds they could leverage. In this case, the banks are in a position to attract fresh capital to boost their capacity to fund a bigger economy.
Even the CBN boss admitted that the banking sector remains robust, with key indicators reflecting systemic resilience, stressing that “the non-performing loan ratio remains within the prudential benchmark of five per cent, showcasing strong credit risk management”.
The banking sector’s liquidity ratio comfortably exceeds the regulatory floor of 30 per cent, ensuring banks maintain adequate cash flow to meet customer needs and operational requirements. Recent stress tests have reaffirmed the continued strength of the industry, as confirmed by the Director of the Banking Supervision Department at the CBN, Olubuka Akinwunmi.
“All our banks are still within the prudential thresholds that were set, and they are actively pursuing various recapitalisation efforts,” he said.
Validations from stakeholders
Group Managing Director of United Bank for Africa (UBA), Oliver Alawuba, described the recapitalisation policy as “both timely and essential” for positioning the financial system to meet the demands of a growing and globally competitive economy.
Alawuba highlighted a stark disparity between Nigerian banks and their international counterparts. While bank assets in advanced economies typically range between 70 and 150 per cent of GDP, Nigerian bank assets accounted for just 11.97 per cent of GDP in 2024.
“Nigerian banks need adequate capital buffers to meet the evolving demands of these sectors. Without this, the industry cannot effectively rise to the challenge,” he explained, emphasising the policy’s role beyond regulatory compliance as a forward-looking strategy for trillion-dollar economy operations. Nigerian banks need adequate capital buffers to meet the evolving demands of these sectors.
Without this, the industry cannot effectively rise to the challenge,” he said.
Alawuba highlighted the stark disparity between Nigerian banks and their counterparts in more advanced economies, where bank assets typically range from 70 to 150 per cent of GDP. In contrast, Nigerian bank assets accounted for only 11.97 per cent of GDP in 2024, a gap he stressed must be closed for the country’s financial system to meet global standards. He applauded the CBN’s directive raising minimum capital requirements, describing it as a timely response to the urgent need for stronger financial institutions.
The UBA boss said well-capitalised banks are essential to delivering on key national priorities, including infrastructure development, digital innovation, inclusive financial services, and economic diversification.
Alawuba noted that a strong and well-capitalised banking sector is fundamental to Nigeria’s goal of building a $1 trillion economy and that the ongoing recapitalisation initiative is a proactive step in that direction.
The Centre for the Promotion of Private Enterprise has backed the recent move by the Central Bank of Nigeria to recapitalise banks.
The Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf, had noted that the purpose of adequate capitalisation was to ensure the efficiency and stability of the financial system.
“The essence of recapitalisation is to ensure the safety of depositors’ funds, strengthen the stability of the financial system, deepen the resilience of the banking system and reposition the bank to support growth,” he said.
Yusuf stated that since the 2005 recapitalisation, the value of the minimum capital had been significantly eroded by inflation.
For instance, the official exchange rate in 2005 was about N130 to the dollar, meaning that the N25 billion minimum capital for a national bank was equivalent to $192 million. One would need N288 billion to attain $192 million benchmark.
The Deputy Governor of the CBN in charge of Corporate Services, Emem Usoro, stressed that achieving the $1 trillion economy requires “structured planning, clearly defined policies, unwavering implementation and an inclusive approach that aligns public and private sector interests”.
“By enabling banks to extend more credit to MSMEs, we enhance job creation and productivity. Furthermore, with increased capital, banks can invest in technology and innovation, crucial for driving digital financial services such as mobile money and agent banking,” he stressed.
The financial sector reforms also aim to strengthen other financial institutions (OFIs), particularly primary mortgage banks (PMBs) and microfinance banks (MFBs), to enhance their efficiency as catalysts of inclusive growth. For several years, PMIs and other specialised financial intermediaries have fallen short of their expectations in building a resilient economy. But the CBN plans to implement model mortgage foreclosure laws, integrate PMBs and MFBs into the GSI platform to leverage the development finance institutions more effectively to drive sustainable growth.
Compliance and enforcement
An important component of the reform is building a more robust approach to regulatory compliance, which would require financial institutions to refine their compliance and governance frameworks to address evolving risks.
Recent enforcement actions have demonstrated the commitment to the new compliance phase. Recent penalties imposed on 29 banks for various breaches, including Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) violations, had totalled N15 billion.
“In addition to these penalties, the banks are required to address the root causes of the lapses, which is crucial for improving regulatory effectiveness,” the CBN stated, expressing confidence that this approach would help to change the narrative around recurring industry issues.
Certainly, an efficient banking sector goes beyond a large capital base. It requires ethical and high-compliance operations to mitigate post-consolidation crises such as the one witnessed in 2008, a few years after the previous recapitalisation programme. This calls for stronger and more proactive supervision.
Outlook
To avert failure, industry observers anticipate potential mergers and acquisitions as banks assess their positions and seek strategic alignments. For one, Unity, after securing regulatory support, and Polaris banks are in the final phase of a business combination as part of their effort to scale through the capital raising hurdle.
The discussion is in line with the commitment to fostering a secure banking environment where depositors have full confidence in the safety of their deposits. The apex bank said it would continue to monitor all financial institutions under its regulatory purview while maintaining robust frameworks for early warning signals and risk-based supervision.
With eight banks already crossing the new capital requirements, Nigeria’s banking sector appears well-positioned to support the emerging economic transformation agenda. And the success of this recapitalisation exercise will likely determine the financial system’s capacity to support Nigeria’s journey toward becoming a trillion-dollar economy by 2030.
On its part, the CBN said its comprehensive approach combining capital strengthening, enhanced supervision and strategic planning reflects its determination to build a resilient banking sector capable of supporting the ambitious economic goal while maintaining the stability and soundness that has characterised the system’s recent performance.
