New Dawn for Nigeria’s Banking Sector

Nigeria’s banking sector is entering a new era of resilience and renewed confidence following a sweeping recapitalisation exercise that has significantly strengthened its financial base, writes Obinna Chima

Nigeria’s banking sector is entering a new phase of strength and stability following a sweeping recapitalisation drive that has reshaped its financial landscape.

With N4.65 trillion raised in fresh capital within 24 months, the industry is now better positioned to support economic growth and withstand shocks.

The Olayemi Cardoso-led Central Bank of Nigeria (CBN) had, on March 28, 2024, announced a two-year bank recapitalisation exercise which commenced on April 1, 2024. The 24-month timeline for compliance ends on March 31, 2026. The upward capital revision is expected to ensure that Nigerian banks have the capacity to take on bigger risks and stay afloat amid both domestic and external shocks. It also means an increased liquidity position of banks, which will help broaden their loss-bearing capabilities.

Specifically, the recapitalisation exercise required a minimum capital of N500 billion, N200 billion, and N50 billion for commercial banks with international, national and regional licences, respectively.

Before the new capital requirements, many banks were operating with low capital levels despite the huge profits they were churning out, compared with their peers on the continent. For instance, commercial banks with international licences were previously only required to hold a minimum capital base of N25 billion, which had been affected by currency devaluation.

Revealing the outcome of the exercise, the CBN on Wednesday disclosed that Nigerian banks raised a total of N4.65 trillion within 24 months, strengthening the resilience of the financial system and enhancing industry capacity to support the economy.

The CBN, in a statement signed by its Director, Banking Supervision, Dr.  Olubukola A. Akinwunmi, and acting Director, Corporate Communications, Mrs. Hakama Sidi Ali, stated that the exercise recorded strong participation from both domestic and international investors, with 72.55 per cent of capital sourced locally and 27.45 per cent from international markets, reflecting sustained confidence in the Nigerian banking sector.

Commenting further on the success of the exercise, Cardoso said, “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 central bank further confirmed that 33 of the 37 banks in the country met the revised minimum capital requirements established under the programme.

It however noted that a limited number of institutions remain subject to ongoing regulatory and judicial processes, which are being addressed through established supervisory and legal frameworks. All banks remain fully operational, ensuring continued access to banking services for customers, the apex bank added.

The CBN further stated that the recapitalisation programme has strengthened Capital Adequacy Ratios (CAR), with the sector maintaining levels above international Basel benchmarks. Minimum CAR thresholds remain at 10 per cent for regional and national banks and 15 per cent for banks with international authorisation.

The recapitalisation, implemented alongside an orderly exit from regulatory forbearance, has improved asset quality, thereby reinforcing balance-sheet transparency and overall financial system stability.

To safeguard these gains, the CBN has also strengthened its risk-based capital adequacy framework, requiring banks to conduct regular stress testing across defined scenarios and maintain appropriate capital buffers.

It pointed out that key regulatory measures, including prudential guidelines and the supervisory framework, were subject to periodic review to support ongoing strengthening of governance, risk management, and sector resilience.

“The recapitalisation programme was carried out without disruption to banking services, ensuring continuous access for individuals and businesses throughout the process.

“The successful completion of the programme establishes a stronger and more resilient banking system, better positioned to support lending, mobilise savings, and withstand domestic and global shocks,” it added.

The central bank further reaffirmed its commitment to maintaining a stable, transparent, and resilient financial system that inspires confidence among depositors, investors, and the broader public, and to advancing the sustainability of the nation’s financial architecture.

An integral part of the exercise was the definition of qualifying capital, which was specified as paid-up share capital and share premium only, thereby excluding the industry’s significant retained earnings reserves and other forms of capital. Banks were also required to comply with the Capital Adequacy Ratio (CAR) relevant to their licence category while trying to meet. the new capital requirements

The CBN did not hide its resolve to ensure that the capital verification process was strict, to prevent bubble capital from entering the system and to ensure that every single kobo invested in the banks passed the anti-money laundering (AML) test.

This was because after the 2004/2005 recapitalisation exercise, banks were then awash with funds and the absence of strong risk management frameworks and effective regulatory oversight, the industry saw the misallocation of funds through excessive and risky lending rose significantly. This led to a regulatory intervention and the removal of some banks’ Chief Executive Officers in 2009.

That was why, to guard against such occurrences, Cardoso recently disclosed that the central bank has redesigned its “credit risk framework to enforce stronger governance, greater transparency, and firmer accountability across the sector. We are determined to break the boom and bust cycle that has accompanied past recapitalisation efforts.”

Additionally, the CBN has raised the regulatory bar for anti-money laundering compliance, directing banks and other financial institutions to take full ownership of their control frameworks, even as it set a June 10, 2026 deadline for the submission of implementation plans under its new automated AML standards.

In a recent circular, the apex bank underscored that compliance with its newly issued Baseline Standards for Automated AML/CFT/CPF Solutions would be assessed at the institutional level, rather than based on the capabilities of technology vendors.

The move signals a shift away from a “tick-box” approach to compliance, amid growing reliance on third-party solutions, as the regulator seeks to strengthen governance, effectiveness, and integration of anti-money laundering and counter-terrorism financing frameworks across the financial system.

Director, Banking Supervision, CBN, Dr Olubukola Akinwunmi, pointed out that Nigerians want to be assured that whenever they transact with banks or keep their money in financial institutions, the money is safe, while the banks are stable, and sound.

He explained that the recapitalisation exercise was designed to strengthen confidence.

Speaking further, he said recapitalisation, “ensures that the banking system is resilient and capable of safeguarding depositors’ funds, giving Nigerians peace of mind when they engage with financial institutions. When that confidence exists, banks are able to mobilise more savings. And when banks mobilise more savings, they can perform their core function more effectively—financial intermediation. This simply means lending to economic agents, including businesses and households.

“When banks lend to businesses, those businesses can expand. Entrepreneurs are able to access financing for viable, bankable projects and ideas. As businesses grow, they create employment opportunities, which in turn improves incomes and livelihoods.

“With increased employment, consumers are better positioned to access credit and purchase goods and services. This drives demand, enabling businesses to expand even further. It creates a virtuous cycle of productivity and growth that is essential for economic development. As the economy grows, government revenues also increase. With higher revenues, the government can invest more in critical infrastructure, further enhancing the productive capacity of the economy. So, in simple terms, this is how recapitalisation affects everyone.”

The Centre for the Promotion of Private Enterprise (CPPE) urged the CBN and the fiscal authorities to see the reconnecting of the banking system to the real economy as the next critical phase of financial service sector’s reform. It however, commended the CBN for the successful implementation of the bank recapitalisation programme.

The organisation decried a situation where the services sector is accounting for about 55 per cent of total credit, while manufacturing, agriculture and Small and Medium Enterprises (SMEs) are receiving about 14 per cent, five per cent and one per cent respectively, saying that this is inconsistent with Nigeria’s aspirations for economic growth.

The Chief Executive Officer of CPPE, Dr. Muda Yusuf, noted that “the recapitalisation programme has successfully strengthened the resilience and stability of Nigeria’s banking system,” which the CBN deserved commendation, especially for delivering a reform process that has been both effective and non-disruptive.

“However, the ultimate success of this reform will be determined not just by stronger balance sheets, but by the extent to which the banking system supports investment, enterprise, job creation and economic transformation. At this critical juncture, the priority must shift from capital adequacy to economic impact. Nigeria needs not just stronger banks, but banks that work for the economy.”

He also urged the CBN to incentivise long-term financing for productive sectors, promote a more balanced sectoral allocation of credit, expand access to consumer credit to stimulate aggregate demand and address the crowding-out effects of public sector borrowing.

According to Yusuf, the successful implementation of the bank recapitalisation programme marked a significant milestone in the ongoing effort to strengthen the resilience, stability and capacity of the Nigerian banking system.

It also said the orderly and non-disruptive manner the recapitalisation exercise was carried without reports of depositor losses, forced mergers, job losses or erosion of shareholder value marked a significant improvement over past consolidation episodes and reflected stronger regulatory capacity, improved market discipline and greater resilience within the banking system.

Indeed, it is a new dawn for Nigerian banking sector as expectation are high that with the recapitalisation exercise over, financial institutions are now better placed to undertake big-ticket transactions, support infrastructure development, play bigger roles in the African Continental Free Trade Area, and also drive Nigeria’s quest for a $1 trillion economy by 2030.

Additionally, well-capitalised banks are essential in mobilising finance for priority sectors such as agriculture, creative economy, SMEs, enhance innovation, boost financial inclusion, as well as employment opportunities. Customers on the other hand look forward to an industry where they would no longer be excessively charged, disputes resolved at ease and innovations to make banking transactions easier and more flexible introduced.

Therefore, Nigeria’s banking sector stands at a defining moment with stakeholders looking forward to stronger balance sheets, improved resilience, and renewed investor confidence going forward. This reform is expected to lay the foundation for a more stable, competitive, and growth-driven financial system.