Nigeria’s recently recapitalised banks will need stronger sector knowledge and risk-management capabilities if their additional capital is to support productive businesses and small and medium-sized enterprises, Central Bank Governor Olayemi Cardoso has said.

Cardoso said raising capital had improved the resilience of the banking system, but it did not by itself guarantee that banks would expand credit effectively. Lenders would also need the skills to identify viable businesses, understand specialised industries and manage the risks attached to longer-term lending.

His comments shift attention from how much capital banks have raised to how well they can deploy it.

The CBN introduced new minimum capital requirements in March 2024, setting thresholds of ₦500 billion for commercial banks with international authorisation, ₦200 billion for national banks and ₦50 billion for regional banks. The exercise was intended to strengthen lenders against shocks and position the financial system to support a larger economy. CBN recapitalisation framework

Speaking during a fireside chat at the BusinessDay CEO Forum in Lagos, Cardoso said the decision initially faced resistance. The CBN nevertheless considered it necessary because the banking system needed larger buffers after currency devaluation and other balance-sheet pressures exposed weaknesses in existing capital positions.

Banks eventually recognised that the exercise was in their own interest, he said. Nigerian lenders operate across several African markets and, in some cases, beyond the continent. Their wider footprint creates an obligation to carry capital appropriate to the risks they assume.

Cardoso said the completed capital-raising process had placed banks in a stronger position to withstand difficult conditions. But he rejected the suggestion that CBN oversight would end once the new capital had been secured.

Supervision, he said, would remain continuous.

That supervision will matter as pressure grows on banks to lend more to the private sector. Aigbogun challenged the governor on the volume of funds going into government securities and the persistent complaints from banks that there were not enough bankable projects.

Cardoso accepted that stronger private-sector lending was necessary but cautioned against asking banks to take poorly understood risks. Banks hold depositors’ funds, he said, and should extend credit only after the risks have been properly analysed and protected against.

The more difficult issue is whether lenders possess the expertise required to distinguish a weak proposal from a viable but complex business.

Financing an oil and gas project, an agricultural value chain, a manufacturing plant or a growing SME requires more than access to funds. Banks must understand each sector’s revenue cycle, regulation, supply chain, currency exposure and operational risks. A lender without that knowledge can either reject viable businesses or approve loans whose risks it has underestimated.

Cardoso referred to recent problems arising from concentrated exposures, particularly in specialised sectors, as evidence of the need for better judgement and stronger institutional capability.

He said the CBN intended to work with the banking system to improve those skills and bring Nigerian lenders closer to the capabilities of international banks operating in complex markets.

For SMEs, this could become one of the most important outcomes of recapitalisation. Smaller businesses frequently struggle to obtain credit because they lack conventional collateral, operate with uneven cash flow or cannot meet documentation standards designed for larger companies. Banks that improve their ability to evaluate business models and transaction histories may be able to lend without abandoning prudent risk controls.

That change will not be immediate. High interest rates continue to limit the number of businesses able to borrow profitably, while banks can earn attractive returns from less complicated assets. Cardoso said the position should improve as inflation and interest rates move to more sustainable levels.

The test of recapitalisation will therefore develop over time. Stronger capital has given banks a larger cushion, but productive lending will depend on the quality of their decisions as much as the size of their balance sheets.

For the CBN, the policy objective is not to compel banks to release funds indiscriminately. It is to build a banking system able to take informed commercial risks, withstand losses when conditions deteriorate and continue supplying credit to the economy.

The capital has been raised. The next measure of progress will be whether banks can turn that strength into sound lending to businesses capable of investing, producing and growing.