Recapitalisation: Private sector credit drops by N1trn
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. However, industry analysts say there is a need for banks to invest the capital in real sectors such as industrialisation that can drive growth. This is coming amidst the drop […]
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.
However, industry analysts say there is a need for banks to invest the capital in real sectors such as industrialisation that can drive growth.
This is coming amidst the drop in credit to the private sector in the last one year as the private sector credit dropped by almost N 1 trillion year-on-year.
Daily Trust reports that the last time the banking sector was recapitalised was during the tenure of Prof. Charles Soludo in 2004 when the capital base of commercial banks was raised from N2 billion to N25 billion.
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22 years down the line, another round of recapitalisation saw 33 banks raising N4.65 trillion in new capital.
The central bank stated that all banks remain fully operational, ensuring continued access to banking services for customers.
It added that the programme has strengthened capital adequacy ratios (CAR), with the sector maintaining levels above international Basel benchmarks.
The apex bank noted that the minimum CAR thresholds remain at 10 per cent for regional and national banks and 15 per cent for banks with international authorisation.
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.
Experts say the new capital raise within the space of 22 months showed the extent of liquidity in the Nigerian economy, saying this money must be ploughed back into improving credit to the real sector of the economy.
Daily Trust reports that while the credit to the private sector was N76.2 trillion in February 2025, it dropped to N75.6 trillion according to the updated CBN figures for February 2026 after increasing to N78 trillion in April, 2025.
A financial analyst, Efosa Aluyi expressed optimism that the banks should be able to expand credit to the private sector after the new capital raise.
He said, “I think at the onset of the whole recapitalisation, there was quite a lot of scepticism around the ability of the banks to raise these funds but they have done quite well. About 73 per cent of the funds were raised locally. Again, that speaks to the resilience and the kind of liquidity we have in our system here.
“At the end of last year, we had a broad money supply of over N100 trillion. That speaks to the sort of resilience we have in the economy.
“What this has done is to create a very strong platform for the banking sector to provide growth for the broader economy.
“Like I highlighted earlier, we saw very significant credit growth in the aftermath of the initial capital raise that we had in the banking sector and we expect that kind of movement this time around as the banks are going to be sitting on quite a huge capital and that money has to go somewhere. So I think the ability of the banks to create credit within the economy has significantly improved.”
Speaking to Daily Trust on the issue, the Chief Economic Strategist in ECOWAS Commission, Prof. Ken Ife noted although the recapitalisation has been concluded, there is a need to examine the impact and what it means to Nigeria’s economy
Given contextual background, he said, “To understand the gravity of the difference of this 2026 recapitalisation, you have to compare this to the exercise in 2005. In 2005, 89 banks were trimmed down to 25 banks with what was an extremely difficult pressure on the banking system. We had an aggressive takeover and had a collapse of some of those banks into complete acquisition and then mergers
“But then, after that particular exercise in 2005, the banks became stronger. Their single legal limit increased and they could finance more loans, and within a year of that exercise, we saw that Nigeria now produced four out of five biggest banks in Africa and four out of five most profitable banks in Africa.”
Speaking on the impact on the economy, he said, “The overall health of the banking sector has remained intact. Why? Because the capital adequacy ratio of 10 percent for national banks and 15 percent for international banks have been fairly achieved by those banks. The non-performing loan of 5 percent is also achieved by most of those banks.”