…Urges lending reforms as Tier-1 capital dips to $1.7bn
By Chinwendu Obienyi
Despite raising over N1.35 trillion in fresh capital in the first year of Nigeria’s ambitious bank recapitalisation programme, tier-1 (top banks) are struggling to match the scale and competitiveness of their continental peers largely due to the steep depreciation of the naira.
This was one of the key findings of a new report by financial intelligence platform Proshare, titled “Tier 1 Banks: Getting Bigger, Braver, and Dominant – The Class of 2025.”
Highlighting how the naira’s decline from below N500/US$ in 2023 to about N1,600/US$ in 2025 has significantly weakened the dollar value of Nigerian banks’ capital, Proshare revealed that banks have been raising capital via rights issues, public offers, private placements, and in a few cases, direct injections from parent companies.
It, however, stated that capital growth alone will not deliver the transformative impact the Federal Government envisions, a $1 trillion economy by 2030 as tier 1 banks in the country remain far behind its peers in the continent.
“Before recapitalisation efforts began in April 2024, Nigeria’s Tier-1 banks had a combined capitalisation of $2.33 billion. Following the capital raise in naira terms, their dollar-equivalent capitalisation now stands at just $1.7 billion—a decline that places them far behind their South African counterparts, which boast a combined capitalisation of $4.16 billion”, the report revealed.
“The sharp currency devaluation is undermining the recapitalisation effort. Even with bigger naira balance sheets, Nigerian banks remain relatively underpowered in global terms”, Founder, B. Adedipe Associates Limited, Biodun Adedipe, said during a panel session at the launch of the report.
The CBN-mandated recapitalisation programme, which excludes retained earnings from Common Equity Tier 1 (CET1) calculations, officially began on April 1, 2024, and runs until March 31, 2026. Banks have largely turned to rights issues, public offers, and private placements to meet the CET1 requirements.
But according to the report, recapitalisation is only the beginning as the absence of a strategic rethink in how banks allocate capital and engage with Nigeria’s real economy, the added firepower may fall short of transformative impact.
A major recommendation in the report is the need to restructure Nigeria’s 46 economic sectors into 14 targeted “sub-economies.” The idea, analysts say, is to simplify financial planning and ensure deeper sectoral engagement.
According to the report, the priority areas include; Marine and Blue Economy, Entertainment and Creative Industries, Hospitality and Real Estate, Minerals, Mining and Energy. “Stronger banks must rebalance their lending portfolios toward these emerging growth sectors, providing medium- to long-term capital that drives productivity and jobs”, the firm said.
The report also underscored the role of artificial intelligence (AI) and automation in reshaping Nigeria’s banking landscape.
It noted that as banks embrace “headless banking”—digitised operations with minimal human interface, cost-to-income ratios (CIRs) are expected to fall, while net interest margins (NIMs) could improve.
“Automation of credit decisions, audits, and risk assessments could also lead to staff reductions, particularly in traditional back-office roles, while opening up new positions in tech and digital services. Banking as a building may die, but banking as a service will remain very much alive,” the report noted.
With the clock ticking on the recapitalisation deadline, analysts expect a wave of mergers, acquisitions, and business combinations, especially among Tier-2 banks who are unable to raise sufficient equity.
“This may be just the first in a series of recapitalisation rounds aimed at building long-term resilience in Nigeria’s banking industry,” Proshare stated.
As Nigeria eyes a $1 trillion economy by 2030, the report concludes that banks must not just grow bigger—but smarter, faster, and more digitally adaptive.
“Dinosaurs didn’t die because they were big, they died because they could not evolve. Nigerian banks would do well to learn from that”, the report said.
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