By Mustafa Biodun
Monetary Policy Committee (MPC) members recently acknowledged the continued stability in the banking system, evidenced by the stable Financial Soundness Indicators (FSIs) which would further be supported by the on-going banking recapitalisation exercise. With eight banks having already met the recapitalisation requirements, and others making progress towards meeting the deadline, the Central Bank of Nigeria (CBN) says it will sustain its oversight of the banking system to ensure continued resilience, safety and soundness of the financial system.
Nigerian banks are facing one of their most interesting moments. First, they have been acknowledged by the Central Bank of Nigeria (CBN)-led Monetary Policy Committee (MPC) members to be safe and sound.
Secondly, they are also recording giant strides in the pursuit of their recapitalisation. Ahead of the March 31, 2026 deadline, eight banks already met the requirement.
These developments point to sound regulatory oversight, and determination of the Yemi Cardoso-led CBN to support government in achieving $1 trillion Gross Domestic Product (GDP) target by 2030.
The Policy Advisory Council report on the national economy had set an ambitious goal of achieving a GDP of $1 trillion, with clearly defined priority areas and strategies.
It is believed that a well-recapitalised banking sector is undeniably crucial in achieving the GDP growth plan. Hence, Cardoso advised banks to prepare for a new round of recapitalisation to ensure they have the necessary capital to support the economic growth.
Cardoso asked: “Will Nigerian banks have sufficient capital relative to the financial system’s needs in servicing a $1trillion economy in the near future? In my opinion, the answer is “No!” unless we take action. That action was the ongoing recapitalisation of banks, meant to prepare them for expansion and attract big ticket transactions to support economic growth”.
While the recapitalisation exercise continues, the apex bank categorically reassured the public, depositors, and stakeholders that the Nigerian banking sector remains resilient, safe, and sound.
“The CBN affirms that it continues to monitor all financial institutions under its regulatory purview and maintains robust frameworks for early warning signals and risk-based supervision. These mechanisms ensure that any emerging issues are promptly addressed to protect the integrity of the financial system,” it said.
The CBN remains dedicated to fostering a secure banking environment where depositors can be fully confident in the safety of their funds. It will continue to monitor and adapt strategies to safeguard the financial interests of all Nigerians and stakeholders in the financial system.
What the law says
The 2007 Central Bank of Nigeria (CBN) Act mandates the apex bank as one of its objectives to promote financial system stability.
The CBN ensures the safety and soundness of the financial system in Nigeria through banking sector reforms, improved access to finance, adequate institutional capacity building and implementation of good corporate governance practices.
Analysts said ensuring financial and banking system stability is important because the failure of financial institutions, particularly banks, is capable of undermining public confidence, precipitate unanticipated contraction in money supply, reduce savings and investments, and induce payment system collapse with adverse effects on the real economy.
More so, the stability of the financial system is very imperative since its achievement ensures effective monetary policy transmission mechanism. As such, ensuring financial system stability will help monetary authorities in achieving the primary objective of price stability.
To achieve financial and banking system stability, the CBN at different times had instituted various reforms aimed at ensuring effective performance of the banking sector.
Recapitalisation exercise continues
The CBN had, on March 28, 2024 announced a two-year bank recapitalisation exercise which commenced on April 1, 2024.
The recapitalisation plan requires minimum capital of N500 billion, N200 billion and N50 billion for commercial banks with international, national and regional licenses respectively.
Others included merchant banks N50 billion; non-interest banks with national license N20 billion and non-interest banks with regional license will now have N10 billion minimum capital. The 24-month timeline for compliance ends on March 31, 2026.
Cardoso said the recapitalisation policy not only strengthens financial stability but also serves as a catalyst for inclusive growth.
“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. These technologies are important to breaking down geographic and economic barriers, bringing financial services to even the most remote areas,” he stated. He said Nigeria has what it takes to deepen financial inclusion and support the growth of business and economy. He said the recapitalisation exercise will also support the government’s efforts to achieve a $1 trillion economy.
The CBN further underscored the importance of banking recapitalisation as a major catalyst for the achievement of the $1 trillion economy agenda of the government.
“In the same vein, Other Financial Institutions (OFIs) hold significant potential to drive productivity and economic growth by expanding access to credit and financial services for underserved individuals and businesses. To unlock this untapped potential, we aim to strengthen key institutions—particularly Primary Mortgage Banks (PMBs) and Microfinance Banks (MFBs)—to enhance their efficiency and impact.”
“Our strategy includes implementing model mortgage foreclosure laws to stimulate lending and reduce delinquency, integrating PMBs and MFBs into the GSI platform to minimize non-performing loans, and leveraging Development Finance Institutions (DFIs) more effectively to provide increased on lending facilities to well-managed OFIs,” he said.
Banking sector remains robust
Under the ongoing recapitalisation programme, the apex bank adopted a distinctive definition of minimum capital base, in addition to paid up share capital and share premium, excluding other reserves and retained profits.
The distinctive definition implied that nearly all banks have to raise new capital, despite the fact that most banks have shareholders’ funds in excess of the minimum capital base.
Cardoso explained that the banking sector remains robust, with key indicators reflecting a resilient system.
“The non-performing loan ratio remains within the prudential benchmark of five per cent, showcasing strong credit risk management. The banking sector liquidity ratio comfortably exceeds the regulatory floor of 30 per cent, a level which ensures banks are maintaining adequate cash flow to meet the needs of customers and their operations. The recent stress test conducted also reaffirmed the continued strength of our banking system,” he said.
“I am pleased to note that a significant number of banks have raised the required capital through rights issues and public offerings well ahead of the 2026 deadline. I believe that the banking sector is in a strong position to support Nigeria’s economic recovery by enabling access to credit for MSMES and supporting investment in critical sectors of our economy,” he said.
The CBN Deputy Governor, Corporate Services, Ms. Emem Usoro, said the journey to a $1 trillion economy requires structured planning, clearly defined policies, unwavering implementation, and an inclusive approach that aligns public and private sector interests.
Usoro said that one of the key components of the $1 trillion ambition is the recapitalisation of Nigerian banks. She noted that banks must be sufficiently capitalised to meet the financial demands of a larger and more dynamic economy.
“As we work towards building a $1 trillion dollar economy, we must consider the recapitalisation of our banks to be able to fund, finance and power the economy, and to favourably compete globally,” Usoro said during a media engagement in Abuja.
She further called for a collective effort from all stakeholders, adding that the financial system must be prepared to play its role in powering development.
“We should particularly pay attention to bank recapitalisation to ensure that our banks are strong, resilient and stable enough to carry out financial intermediation, and the much-needed financing of development projects and programmes,” Usoro said.
The Group Managing Director of United Bank for Africa (UBA), Oliver Alawuba described the ongoing CBN bank recapitalisation policy as both timely and essential in positioning the financial system to meet the demands of a growing and globally competitive economy.
According to Alawuba, the initiative is expected to boost the resilience of the banking sector by strengthening its capacity to withstand economic shocks such as inflation, currency volatility and global geopolitical disruptions. He noted that the policy will also place Nigerian banks on a stronger footing to finance the country’s long-term economic transformation, including funding of large-scale infrastructure and industrial projects.
Alawuba further stressed that the recapitalisation policy goes beyond regulatory compliance. It is a forward-looking strategy aimed at equipping Nigerian banks to operate at the scale and sophistication required by a trillion-dollar economy. He said the move would enhance the sector’s ability to support traditional economic drivers such as oil and gas, agriculture and manufacturing, as well as emerging sectors such as fintech, green energy and infrastructure development.
“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 further pointed out the sharp contrast between Nigerian banks and their counterparts in more advanced economies, where bank assets typically range between 70 and 150 per cent of Gross Domestic Product (GDP). In Nigeria, bank assets accounted for just 11.97 percent of GDP as of 2024, a gap he said must be addressed if the country’s financial system is to align with international standards.
He commended the CBN’s recent directive mandating a significant increase in minimum capital thresholds, describing it as recognition of the urgent need for stronger financial institutions capable of delivering on national priorities such as infrastructure expansion, digital transformation, inclusive financial services and economic diversification.
Alawuba concluded that a robust, well-capitalised banking sector is critical for Nigeria’s aspiration to become a one trillion-dollar economy, and the recapitalisation drive is a forward-looking step to achieve that goal.
Director of the Banking Supervision Department at the CBN, Olubuka Akinwunmi provided insights into the state of the banking sector by stating that banks have so far remained within the prudential thresholds stipulated by the regulator, including benchmarks for capital adequacy ratio and non-performing loans.
“Currently, all our banks are still within the prudential thresholds that were set. And they are actively pursuing various recapitalisation efforts,” Akinwunmi said.
On the possibility of mergers and acquisitions, Akinwunmi said such developments may occur naturally as banks assess their positions and seek strategic alignments.
“Banks are currently focused on raising their own capital, but engagements are ongoing and when the opportunities arise, they will be taken,” Akinwunmi added.
Compliance
On compliance, the CBN stated that starting in 2025, financial institutions will be required to refine their compliance and governance frameworks to address evolving risks.
“We are enhancing regulatory effectiveness and accountability, as demonstrated by recent changes to our supervisory and enforcement approach. Recently, penalties totaling N15 billion were imposed on 29 banks for breaches, including AML/CFT violations”.
“In addition to these penalties, the banks are required to address the root causes of the lapses, which is crucial for improving regulatory effectiveness. Historically, the industry has struggled with recurring issues, but we are confident that this approach will help change that narrative”
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