From Adanna Nnamani, Abuja
With the global lending space shrinking as many developed nations maintain protectionist stance due to various economic quakes, financial experts are hailing the Central Bank of Nigeria (CBN) for successfully pulling off the bank recapitalisation programme.
With that comes additional funds for running the country, especially buoying large-scale infrastructure projects needed to revamp the economy.
The journey to recapitalisation took off on March 28, 2024 when the CBN Governor, Olayemi Cardoso announced it. The race itself commenced on April 1, 2024 with a 24-month compliance deadline for commercial, merchant and non-interest banks to meet new minimum capital requirements, on or before March 31, 2026.
The exercise, dubbed by analysts, policymakers and investors as one of the most consequential financial reforms in Nigeria’s recent history, saw the mobilisation of N4.65 trillion in fresh capital.
This has fundamentally altered the strength, capacity and outlook of the country’s financial system.
Beyond the impressive headline figure, the recapitalisation marks a deliberate shift in policy direction. It is not simply about bigger balance sheets, but about building institutions capable of supporting a much larger and more complex economy.
The CBN has consistently framed the reform as a cornerstone of Nigeria’s ambition to achieve a $1 trillion economy, arguing that such a target is unattainable without banks that can fund long-term, high-value investments.
CBN Governor, Olayemi Cardoso, emphasised this point, stating that the exercise was designed to create a resilient financial system that can withstand shocks while supporting sustainable growth.
According to him, “The recapitalisation programme has strengthened the capital base of Nigerian banks, reinforcing the resilience of the financial system and ensuring it is well-positioned to support economic growth and withstand domestic and external shocks.”
The framework
Central to the recapitalisation programme was a revised capital framework designed to ensure that banks operate at a scale commensurate with the demands of a growing economy. International commercial banks were required to raise a minimum capital base of N500 billion, national banks N200 billion, and regional banks N50 billion, with merchant and non-interest banks operating under separate thresholds tailored to their business models.
By the March 31, 2026 deadline, 33 banks had successfully met these requirements, collectively raising N4.65 trillion. According to the CBN, the exercise attracted strong participation from both domestic and international investors, with 72.55 per cent of the funds sourced locally and 27.45 per cent from foreign markets. This mix, according to the CBN Governor, not only reflects confidence in the Nigerian banking sector but also signals a broader endorsement of the country’s reform trajectory.
The apex bank also highlighted that the recapitalisation was executed without disrupting banking operations. Throughout the 24-month period, financial institutions remained fully functional, ensuring uninterrupted access to services for individuals and businesses. In addition, key financial soundness indicators, including capital adequacy and liquidity ratios, have improved significantly, with many banks now operating above international benchmarks.
Why infrastructure financing has been constrained
For decades, Nigeria’s economic growth has been hampered by a persistent infrastructure deficit. From unreliable electricity supply and inadequate road networks to limited industrial capacity and insufficient housing, the gaps are both wide-ranging and deeply entrenched. Addressing these challenges requires sustained investment on a scale that has historically been beyond the reach of the banking sector.
The structural nature of the problem lies in the mismatch between the funding profile of banks and the financing needs of infrastructure projects. Infrastructure investments are capital-intensive, long-term, and often characterised by delayed returns. In contrast, Nigerian banks have traditionally relied on short-term deposits, limiting their ability to provide long-tenor loans without exposing themselves to significant risks.
This limitation forced the government to take on a dominant role in infrastructure financing, often through borrowing. While this approach has enabled some progress, it has also contributed to rising public debt and constrained fiscal flexibility. Analysts have long argued that without a stronger and more capable banking system, private sector participation in infrastructure development would remain limited.
Expanded lending capacity
The successful mobilisation of N4.65 trillion in fresh capital is expected to significantly alter this dynamic. With stronger capital bases, banks are now better equipped to underwrite large transactions, absorb potential losses, and extend credit over longer periods. This enhanced capacity is critical for financing infrastructure projects that require substantial upfront investment and long gestation periods.
Cardoso emphasised the importance of this shift, noting that “sustainable economic growth is unattainable without a resilient financial system. This recapitalisation ensures Nigerian banks can fund the scale of transactions needed to drive a $1 trillion economy.”
Supporting this perspective, the World Bank Country Director in Nigeria, Matthew Verghis, described the recapitalisation as a key enabler of economic transformation. He stated that a stronger banking system would provide the foundation for financing Nigeria’s long-term ambitions, including infrastructure development, industrial expansion, and support for small and medium-sized enterprises.
“A stronger banking system creates the foundation to finance Nigeria’s long-term ambitions, from empowering MSMEs and expanding productive capacity to unlocking large-scale infrastructure development. The opportunity before us is clear: to convert stronger balance sheets into deeper intermediation, greater resilience, and inclusive growth that accelerates Nigeria’s journey toward a more competitive and sustainable economy,” Verghis said.
The exercise, President, Bank Customers Association of Nigeria (BCAN), Dr. Uju Ogubunka, said enables banks to offer more affordable loans, broaden their operations, and deliver better services to customers.
“The banks have raised significant funds to shore up their capital bases. Now, we expect them to improve on service quality and shun excess charges,” he said.
Recent data from the CBN suggests that the impact of the recapitalisation is already beginning to take shape. Credit to the domestic economy rose to N111.39 trillion in February 2026, the highest level since November 2024, indicating a gradual increase in lending activity as banks begin to deploy their strengthened capital.
Infrastructure as economic catalyst
Infrastructure financing sits at the heart of Nigeria’s growth strategy, and the recapitalisation programme is expected to play a pivotal role in unlocking investments across key sectors. Improved access to financing for power projects can enhance electricity supply, reducing reliance on expensive alternatives and boosting industrial productivity. Investments in transportation networks can lower logistics costs, facilitate trade, and improve connectivity across regions.
In the manufacturing sector, access to long-term financing can support the establishment of new plants, expansion of existing facilities, and adoption of modern technologies. Similarly, in the digital economy, increased funding can accelerate the development of broadband infrastructure, data centres, and innovation hubs, driving growth in emerging sectors.
These investments have a multiplier effect, generating employment, increasing productivity, and enhancing overall economic competitiveness. By enabling banks to finance such projects, the recapitalisation programme is effectively laying the groundwork for a more diversified and resilient economy.
Investor confidence and global participation
One of the standout features of the recapitalisation exercise is the level of investor participation it attracted. The fact that over a quarter of the funds raised came from international markets underscores growing confidence in Nigeria’s financial system and reform agenda. This inflow of foreign capital is particularly significant in a global environment where investors are increasingly selective and risk-averse.
The participation of international investors not only strengthens the capital base of the nation’s banks but also enhances their credibility in global financial markets. Well-capitalised banks are better positioned to engage in cross-border transactions, attract additional funding, and support international trade.
The CBN has attributed this confidence to ongoing reforms aimed at improving governance, transparency, and policy consistency. By strengthening regulatory oversight and enforcing stricter compliance standards, the apex bank has sought to rebuild trust in the financial system and create a more predictable investment environment.
Expert views
While the recapitalisation has been widely praised, experts have stressed that its success will ultimately depend on how effectively the newly raised capital is deployed.
The Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Muda Yusuf, raised concerns about the current structure of lending in Nigeria, especially the limited access to credit for small businesses.
According to him, “SME credit in Nigeria accounts for only about one per cent of total credit, lower than the average of about five per cent in sub-Saharan Africa.”
He described this as one of the most significant weaknesses in Nigeria’s financial architecture, noting that priority must shift from capital adequacy to economic impact. “Nigeria needs not just stronger banks, but banks that work for the economy,” he added.
Also speaking on the policy direction needed to maximise the impact of recapitalisation, Economist Ayo Teriba called for a review of monetary constraints that could limit lending. He argued that the Central Bank should ease liquidity conditions, stating that the Cash Reserve Requirement should be cut to either one per cent or removed completely, noting that prevailing macroeconomic conditions no longer justify the tight monetary stance. He further stressed that while recapitalisation has addressed capital adequacy concerns, authorities must now focus on ensuring that funds flow into the real economy.
Industry operators have also reinforced these views, as the Manufacturers Association of Nigeria (MAN) has urged the CBN to take deliberate steps to ensure that a greater share of bank lending is directed toward the industrial sector.
The association emphasised that the government, through the apex bank, should create the much-needed environment for extending long-term loans to manufacturers at single digit interest rate,” noting that access to affordable financing remains a major constraint to industrial expansion.
Similarly, President of the Bank Customers Association of Nigeria, Uju Ogubunka, highlighted the expectations of customers and businesses following the recapitalisation exercise. He said the development presents an opportunity for banks “to provide cheaper loans, expand their operations and provide improved services to customers,” stressing that the benefits of increased capital must be felt across the broader economy.
Also lending his voice, President of the Association of Bureaux De Change Operators of Nigeria, Aminu Gwadabe, underscored the importance of translating stronger capital into more accessible credit. According to him, “We need cheaper loans. Big capital should reflect on cheaper and more affordable loans. Also, banks should lend for longer terms, and projects that support the economy.” He added that with improved capital buffers, Nigerian banks are now better positioned to compete globally and support large-scale investments.
Collectively, these views highlight a shared expectation among stakeholders that the N4.65 trillion recapitalisation should go beyond strengthening bank balance sheets and translate into tangible economic outcomes, particularly through increased lending to infrastructure, manufacturing, and small businesses that drive growth and employment.
Policy alignment and regulatory oversight
The recapitalisation programme is part of a broader framework of economic reforms aimed at strengthening Nigeria’s macroeconomic stability. The CBN has emphasised the importance of aligning monetary policy with fiscal measures to create an enabling environment for investment.
Recent policy actions, including foreign exchange reforms and efforts to improve fiscal discipline, are expected to complement the impact of recapitalisation by enhancing liquidity conditions and reducing borrowing costs. At the same time, the CBN has introduced a risk-based capital adequacy framework that requires banks to conduct regular stress testing and maintain adequate capital buffers.
Cardoso reiterated the importance of these measures, stating that the apex bank is committed to enforcing stronger governance, greater transparency, and firmer accountability across the sector. According to him, these steps are essential to ensuring that the gains from recapitalisation are sustained over the long term.
Lessons from past reforms
Nigeria’s banking sector has undergone significant transformation over the years, most notably during the consolidation exercise of 2004. That reform reduced the number of banks and strengthened their capital base, laying the foundation for a more stable and competitive industry.
The current recapitalisation builds on that legacy but goes further by incorporating lessons from past experiences. Unlike previous reforms that focused primarily on capital thresholds, the current programme places greater emphasis on governance, risk management, and global competitiveness.
Analysts note that this comprehensive approach is critical for addressing the complexities of a modern financial system and avoiding the pitfalls of past cycles, where rapid credit expansion sometimes led to instability. By focusing on sustainability and prudent lending, the CBN said it aims to ensure that the banking sector remains resilient in the face of future challenges.
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