How CBN’s banking recapitalisation ‘ll impact Nigeria’s economy

As the banking recapitalisation comes to an end, Nigerian banks are entering a new phase of financial resilience to drive industrialisation and boost economic growth. Daily Trust reports that the last time banking sector was recapitalised was during the tenure of Prof. Charles Soludo in 2004 when capital base of commercial banks was raised from […]

As the banking recapitalisation comes to an end, Nigerian banks are entering a new phase of financial resilience to drive industrialisation and boost economic growth.

Daily Trust reports that the last time banking sector was recapitalised was during the tenure of Prof. Charles Soludo in 2004 when capital base of commercial banks was raised from N2 billion to N25 billion

22 years down the line, another round of recapitilisation beckons, as part of efforts to boost financial sector stability.

Meanwhile available data show that the total capital raised under the ongoing banking recapitalisation could rise to about N6 trillion as banks are still allowed a window of more than N1.5 trillion in pending capital raising deals, mostly set to materialise before the March 31 2026 deadline.     

Subsequently, in March 2024, the CBN released its circular on review of minimum capital requirement for commercial, merchant and non-interest banks. The apex bank increased the new minimum capital for commercial banks with international affiliations, otherwise known as mega banks, to N500 billion; commercial banks with national authorization (N200 billion) and commercial banks with regional license (N50 billion).

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.   

Under the new minimum capital base, CBN uses a distinctive definition of the new minimum capital base for each category of banks as the addition of share capital and share premium, as against the previous use of shareholders’ funds.

Consequently, 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 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.

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.

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

Also commenting, Nigeria’s first professor of capital market, Prof. Uche Uwaleke noted “The recapitalization exercise has largely been a success so far. With 33 out of 37 banks already meeting the new requirements according to the Central Bank of Nigeria, it reflects strong investor confidence and the sector’s readiness to adjust to tighter prudential standards,”

On what it means for the economy, “The bank balance sheets also signal renewed external confidence in Nigeria’s financial system and macroeconomic direction. It has, in turn, helped improve stock market performance and liquidity.

“However, what it means now is more capital to invest critically in MSMEs through lending and improving industrialisation of the country,”

 

Why recapitalisation matters – CBN

Commenting  on the recapitalisation, the CBN said unlike the 2005 consolidation, which saw a significant number of bank failures and forced mergers under acute time pressure, the 2024–2026 exercise was designed to allow institutions to raise capital through a variety of mechanisms, rights issues, public offers, mergers and acquisitions, within a structured 24-month window.

The result, the CBN said, is a sector with strengthened capital adequacy ratios (CAR) that now exceed international Basel benchmarks. Minimum CAR thresholds remain at 10 per cent for regional and national banks and 15% for banks with international authorisation, requirements that align Nigeria’s banking supervision standards with those applied in major financial centres globally.

It added that the recapitalisation was implemented to allow an orderly exit from the regulatory forbearance arrangements that had allowed some institutions to defer recognition of certain balance sheet risks.

That exit now means that the capital adequacy improvements confirmed by the CBN reflect genuine underlying financial strength, not a managed accounting picture.

The CBN said asset quality across the sector has improved as a result, reinforcing balance sheet transparency and the credibility of reported financial positions. 

For investors, analysts and counterparties assessing Nigerian banks, the significance of this is considerable: the numbers now say what they mean.

The apex bank added that its risk-based capital adequacy framework has been strengthened, with banks now required to conduct regular stress testing across defined scenarios and maintain appropriate capital buffers. 

 

Recapitalisation ‘ll reposition Nigeria’s financial system – Cardoso

According to the CBN Governor Mr Olayemi Cardoso, “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.”

The CBN governor added that the recapitalisation programme had strengthened the capital base of Nigerian banks, reinforcing the resilience of the financial system.

Cardoso said that it also ensured that the financial system was well-positioned to support economic growth and withstand domestic and external shocks

Further checks show that one of the most immediate benefits of the completed recapitalisation exercise is the emergence of stronger and more resilient banks, a development widely seen as critical to the stability of Nigeria’s financial system. With significantly larger capital bases, Nigerian banks are now better equipped to absorb financial shocks that may arise from economic downturns, currency volatility, or unexpected global disruptions. In practical terms, this means that banks are less likely to collapse under pressure, thereby protecting depositors’ funds and maintaining confidence in the financial system. 

The new capital acts as a buffer that allows banks to continue operating even when faced with losses. Before the recapitalisation, some banks operated with relatively thinner capital cushions, making them more vulnerable during periods of stress. 

Also, beyond stronger balance sheets, the recapitalisation exercise has also seen improvements in risk management practices across the banking sector.