Eromosele Abiodun Posits that the Central Bank of Nigeria’s decision to embark of recapitalisation of banks was to align monetary, fiscal policies with the federal government’s vision of prosperity for Nigerians, businesses

Building bigger and stronger banks comes with great benefits to the banks, their customers and the wider economy. For a government that wants to grow its economy to $1 trillion mark, the support of the financial services sector led by the Central Bank of Nigeria (CBN) Governor, Olayemi Cardoso is crucial.

The CBN boss had explained that bank recapitalisation ensures that lenders are well-capitalised, enabling them to take on greater risks, particularly in underserved markets. With stronger capital bases, banks can provide more loans and financial products to Micro Small and Medium Enterprises (MSMEs), rural communities, and other vulnerable segments that have previously struggled to access formal financial services. The CBN had on March, 28, 2024 announced a two-year bank recapitalisation exercise which commenced on April 1, 2024, and is expected to end on March 31, 2026. The 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.

The recapitalisation exercise, which is far underway, is recording significant successes, with successful capital raising by many banks and surge in credit expansion to the domestic economy. Recently, Cardoso explained that with stronger capital bases, banks can provide more loans to businesses and support government’s quest for $1 trillion economy.

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 key 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 recapitalization exercise  will also support government’s efforts to achieve $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.

Banking sector remains robust

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 right 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.

On her part, Deputy Governor, Corporate Services, CBN, Ms. Emem Usoro said the journey to $1 trillion economy requires structured planning, clearly defined policies, unwavering implementation, and an inclusive approach that aligns public and private sector interests.

In her Keynote address in Abuja at a seminar organised by the CBN for business editors and financial correspondents, 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.

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 significant 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.

Supporting her position, Director of the Banking Supervision Department at the CBN, Dr. Olubuka  Akinwumi, provided insights into the state of the banking sector. He disclosed that banks have so far remained within the prudential thresholds stipulated by the regulator, including benchmarks for capital adequacy ratio and non-performing loans.

“As we speak, all our banks are still within the prudential thresholds that were set. And they are actively pursuing various recapitalisation efforts,”Akinwunmi said.

Mergers and Acquisitions

On the possibility of mergers and acquisitions,  Akinwumi 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.

Regarding the licensing of new banks, he confirmed a recent uptick in applications and approvals, noting that the apex bank continues to monitor and support institutions that align with national development goals.

He said priority sectors such as agriculture, infrastructure, and manufacturing are receiving attention from both the government and financial institutions, as they are key to achieving a trillion-dollar economy.

“If you look at this year’s national budget, it reflects a clear emphasis on critical sectors like health, education, infrastructure and agriculture. Banks are taking cues from these priorities, recognizing them as viable areas for business expansion,” Akinwumi said.

Responding to questions on how many internationally active banks had met the new N500 billion capital requirement, he noted that substantial progress has already been made.

“We are halfway through the journey in terms of timeline, and in terms of capital already raised, we are also at least halfway through. That is a positive signal,” he said.

He added that the decision to start the recapitalisation process early has helped insulate the financial system from emerging global and domestic shocks.

“The emerging global economic shifts and pressures were not lost on the management of the CBN. We started early. If we had waited till now, the challenges would have been greater. But we acted in time,” he remarked.

Akinwumi expressed confidence that the recapitalisation requirements will be met, stressing that existing shareholders’ funds continue to serve as a buffer. However, the CBN deliberately opted for fresh capital inflows, particularly from foreign investors who have shown renewed confidence in Nigeria’s financial system.

“International perception of Nigeria’s banking sector is improving. The reforms over the past year, especially around the foreign exchange regime and improved transparency regarding reserves, have boosted investor confidence,” he said.

He cited recent disclosures on Nigeria’s net reserves and improvements in regulatory credibility as key factors that are reshaping the outlook for foreign direct investment in the banking sector.

On the Loan to Deposit Ratio (LDR), Akinwumi explained that the current 50 per cent benchmark does not reflect a reluctance to lend but rather a contextual response to inflation and other macroeconomic challenges.

“As the macroeconomic environment stabilizes, banks will naturally increase lending. It’s a cautious approach to ensure that lending supports sustainable growth,” he said.

He also touched on the Cash Reserve Ratio (CRR), stating that there has been marked improvement in transparency. Banks now have a clearer understanding of CRR computations, unlike in the past, which enhances predictability and compliance.

Support for SMEs

Addressing Small and Medium Enterprises (SME) funding, he confirmed that banks continue to make provisions, but the CBN remains actively engaged to ensure proper disbursement and sectoral targeting. Supervisory oversight, he explained, is being deployed to verify compliance and effectiveness of disbursed funds.

On incentives, he said the most powerful incentive for banks lies in the opportunities provided by a growing economy.

“A stronger bank can take on big-ticket businesses, including infrastructure financing. The current reforms, such as the infrastructure concessioning plans, present viable business opportunities for well-capitalized banks,” Akinwumi explained.

The capital verification process, according to him, is thorough and designed to ensure that only legitimate, unborrowed funds are used for recapitalisation. An industry-wide tracking mechanism has been established to streamline verification across institutions and enhance collaboration.

“Our examiners follow each capital trail meticulously, moving from one bank to another as necessary. Even if it’s not your bank under verification at that moment, we expect full cooperation to trace the sources of capital,” he said.

On the broader question of resilience to global shocks, he maintained that Nigerian banks are being positioned to remain attractive to investors and capable of withstanding external disruptions.

“CBN is monitoring developments closely and adjusting where necessary. The recapitalisation process is not just about compliance — it’s about long-term stability, competitiveness, and economic transformation,” he said.

Expert’s View

Speaking, the Group Managing Director of United Bank for Africa (UBA), Mr. Oliver Alawuba, described the CBN ongoing 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 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 both traditional economic drivers such as oil and gas, agriculture, and manufacturing, as well as emerging sectors like 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 pointed out the sharp contrast between Nigerian banks and their counterparts in more advanced economies, where bank assets typically range between 70 to 150 percent 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 a 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 step in the right direction to achieve that goal.