CBN: Building a sound, resilient banking sector as recapitalisation gains momentum

Nigeria’s banking system is navigating one of the most defining moments in its modern history. Amid macroeconomic headwinds and far-reaching reforms, the Central Bank of Nigeria (CBN) says the sector remains fundamentally stable, sound, and resilient—even as banks race to meet new capital requirements that are reshaping the industry.

At the heart of this transformation is the CBN-led recapitalisation programme, a two-year exercise designed to strengthen banks’ balance sheets, enhance their capacity to absorb shocks, and position the financial system to support Nigeria’s long-term economic ambitions, including the drive toward a $1 trillion economy by 2030.

The CBN Governor, Mr. Olayemi Cardoso, has repeatedly reassured Nigerians that while the apex bank remains vigilant to emerging risks — including cyber threats, credit-concentration pressures, and operational vulnerabilities — decisive regulatory actions are already in place to address them.

These include strengthened risk-based supervision, tighter governance standards, and the ongoing transition to Basel III, which is expected to improve capital quality, strengthen liquidity monitoring, and further bolster the resilience of the banking sector.

 MPC affirms banking sector stability

Confidence in the banking system received a significant boost at the 303rd Monetary Policy Committee (MPC) meeting held in Abuja, where members noted with satisfaction the sustained resilience of the sector.

According to the MPC, most financial soundness indicators remain within regulatory thresholds, reflecting prudent risk management and effective supervision. The committee also acknowledged the substantial progress made under the ongoing recapitalisation programme, disclosing that 16 banks have already achieved full compliance with the revised minimum capital requirements.

The MPC urged the CBN to ensure the successful implementation and timely conclusion of the exercise, stressing its importance to financial stability and economic growth.

With less than four months to the end of the recapitalisation window, the CBN insists the process is firmly on track.

 Recapitalisation gaining momentum

Speaking at the recently held Bankers’ Dinner in Lagos, Governor Cardoso said several banks have already met the new capital thresholds, while others are making steady progress and are well-positioned to comfortably meet the March 31, 2026 deadline.

“To date, 27 banks have raised capital through public offers and rights issues, and sixteen have already met or exceeded the new requirements — a clear testament to the depth, resilience, and capacity of Nigeria’s banking sector,” Cardoso said.

He added that stress-testing conducted during the year confirms the sector’s underlying strength.

“As we strengthen the capacity of our banks, stress-testing this year confirms that Nigeria’s banking sector remains fundamentally robust. Key financial soundness indicators overwhelmingly satisfied prudential benchmarks during the year,” the CBN governor stated.

Indeed, banks have recorded milestones in their recapitalisation journeys, with several achieving compliance well ahead of the regulatory deadline.

Protecting ₦4.14 trillion in new capital

Beyond raising fresh capital, the CBN is taking steps to ensure that the estimated ₦4.14 trillion expected to be mobilised during the recapitalisation exercise is properly protected and deployed.

Governor Cardoso disclosed that the apex bank is redesigning the banking sector’s credit-risk framework to enforce stronger governance, greater transparency, and firmer accountability.

“As recapitalisation progresses, we are redesigning the 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,” he said.

As part of these reforms, the CBN has established a dedicated Compliance Department, now fully operational, with responsibilities covering financial crime supervision, market conduct, enterprise security, corporate governance, and environmental, social, and governance (ESG) standards.

The apex bank is also strengthening systems to improve credit monitoring and reduce systemic risk. The Credit Risk Management System (CRMS) has been made web-enabled, allowing banks and other stakeholders to submit statutory returns and conduct borrower status enquiries directly. Plans are also underway to integrate the CRMS with internal bank systems to enhance efficiency and oversight.

 Why recapitalisation matters

A report by Deloitte titled: “Nigeria’s macro headwinds trigger bank recapitalisation” estimates that total funds to be raised under the exercise will amount to ₦4.14 trillion by March 31, 2026.

According to the report, the upward revision of banks’ minimum capital base — from as low as ₦50 billion to as high as ₦500 billion, depending on licence type — is essential to boosting capital adequacy in an economy grappling with high inflation, elevated interest rates, currency volatility, and foreign exchange illiquidity.

“Nigeria banks’ capital adequacy has been significantly impacted by macroeconomic challenges,” Deloitte said. “The upward revision will ensure that Nigerian banks have the capacity to take on bigger risks and stay afloat amid both domestic and external shocks.”

The report added that higher capital levels would improve liquidity positions, expand loss-absorption capacity, and strengthen confidence in the financial system.

Basel III and emerging risks

While emphasising the sector’s soundness, Cardoso acknowledged the evolving risk landscape confronting banks.

“Nigeria’s banking system remains fundamentally sound and resilient, a cornerstone of our financial stability. At the same time, we remain vigilant to emerging risks, including cyber threats, credit-concentration pressures, and operational vulnerabilities,” he said.

The ongoing transition to Basel III, he explained, would further enhance resilience by improving capital buffers, strengthening liquidity coverage, and tightening supervisory oversight.

The CBN is also reinforcing operational discipline to ensure the financial system serves Nigerians efficiently and reliably.

Fixing the cash ecosystem

One area of renewed regulatory focus is cash management. According to Cardoso, the CBN carried out a comprehensive end-to-end review of the entire cash lifecycle — from production and transportation to distribution and consumer access.

“This holistic assessment enabled us to address root causes rather than symptoms,” he said.

As a result, the apex bank recalibrated its cash-printing models, issued guidelines on optimal ATM-to-card ratios, strengthened approval requirements before ATM or branch closures, enforced sanctions on banks whose ATMs fail to dispense cash, and intensified supervision of payment agents and POS operators nationwide.

Banking sector and the $1 trillion economy

These regulatory actions align with broader government efforts to grow Nigeria’s economy to $1 trillion in GDP by 2030. The Policy Advisory Council report on the national economy identifies financial sector strength as a critical enabler of this ambition.

Analysts agree that a well-capitalised banking sector is indispensable to achieving sustained economic expansion. Stronger banks can finance infrastructure, support industrialisation, fund MSMEs, and attract foreign investment.

Cardoso believes the current recapitalisation is only a necessary first step.

“Will Nigerian banks have sufficient capital relative to the financial system’s needs in servicing a $1 trillion economy in the near future? In my opinion, the answer is no — unless we take action,” he said.

“That action is the ongoing recapitalisation of banks, meant to prepare them for expansion and attract big-ticket transactions to support economic growth.”

As the exercise continues, the CBN has reassured depositors, investors, and the general public that the banking system remains 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,” the apex bank said.

“These mechanisms ensure that any emerging issues are promptly addressed to protect the integrity of the financial system.”

The recapitalisation framework

The recapitalisation programme was announced on March 28, 2024, and commenced on April 1, 2024, with a 24-month compliance window ending March 31, 2026.

Under the new framework, commercial banks with international licences must maintain a minimum capital of ₦500 billion; national banks ₦200 billion; and regional banks ₦50 billion. Merchant banks are required to hold ₦50 billion, while non-interest banks must maintain ₦20 billion for national licences and ₦10 billion for regional licences.

Importantly, the CBN adopted a distinctive definition of minimum capital, focusing strictly on paid-up share capital and share premium, while excluding retained earnings and other reserves. This meant that even banks with strong shareholders’ funds were required to raise fresh capital.

Key indicators remain strong

Despite the scale of the exercise, the CBN says key indicators point to a robust banking system.

“The non-performing loan ratio remains within the prudential benchmark of five per cent, showcasing strong credit risk management,” Cardoso said.

“The banking sector liquidity ratio comfortably exceeds the regulatory floor of 30 per cent, ensuring banks maintain adequate cash flow to meet customer needs and operational requirements.”

Recent stress tests also reaffirmed the sector’s resilience.

The CBN Deputy Governor, Corporate Services, Ms. Emem Usoro, said achieving a $1 trillion economy would require structured planning, policy clarity, and collaboration between the public and private sectors.

“One of the key components of the $1 trillion ambition is the recapitalisation of Nigerian banks,” she said. “Banks must be sufficiently capitalised to fund, finance, and power the economy, and to compete favourably on the global stage.”

Industry leaders have echoed this sentiment. The Group Managing Director of United Bank for Africa (UBA), Mr. Oliver Alawuba, described the recapitalisation policy as timely and essential.

According to him, the initiative will strengthen banks’ capacity to withstand shocks arising from inflation, currency volatility, and geopolitical disruptions, while positioning them to finance large-scale infrastructure and industrial projects critical to Nigeria’s transformation.

         What the law says

The CBN’s actions are firmly rooted in law. The 2007 CBN Act mandates the apex bank to promote financial system stability as a core objective.

Through reforms, improved access to finance, enhanced institutional capacity, and enforcement of sound corporate governance, the CBN seeks to safeguard confidence in the financial system.

Analysts warn that banking instability can undermine public trust, disrupt payment systems, constrain credit, and weaken the real economy. Conversely, a stable financial system enhances monetary policy transmission and supports price stability.

             Looking ahead

As Nigeria’s banking sector approaches the final phase of recapitalisation, the message from regulators is clear: the system is strong, supervision is tightening, and the reforms are designed not just to meet today’s challenges, but to prepare banks for the demands of tomorrow’s economy.

In a period marked by global uncertainty and domestic reform, the CBN’s recapitalisation drive is emerging as a defining pillar of financial stability — and a critical foundation for Nigeria’s long-term growth aspirations.

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