By Chukwuma Umeorah
Nigeria’s major banks are on course to exceed the Central Bank of Nigeria’s (CBN) recapitalisation targets ahead of the 2026 deadline, with analysts predicting a decline in inflation and interest rates that could drive economic stability and investment growth.
Already, banks such as GTCO, FCMB, and Access Bank have completed the first tranche of their capital raise through public offers and rights issues. Stakeholders remain optimistic that the recapitalisation exercise will strengthen Nigeria’s banking system, enhancing its ability to drive investment and economic transformation.
Speaking on the outlook for the banking sector and capital market, Olatunde Amolegbe, CEO of Arthur Stevens Asset Management and former president of the Chartered Institute of Stockbrokers, projected that most major banks would achieve their capitalisation targets in 2025. “What we are going to see in the first quarter of the year is a much stronger banking sector that will play an even larger role in economic development,” he said. Amolegbe further noted that macroeconomic conditions were expected to improve, with inflation forecasted to decline from 33.7 per cent to 27.4 per cent in 2025, while interest rates may ease in response to stabilization in the foreign exchange market. He explained that a stable FX environment would reduce uncertainty, encourage investment, and contribute to lower inflation.
“The FX market appears to have reached a plateau, suggesting a potential stabilisation or even depreciation in the near future. This trend holds significant implications. A stable FX market would positively impact the equities market by reducing uncertainty and fostering investor confidence. Furthermore, a stabilised exchange rate could contribute to a decline in inflation. Consequently, we anticipate that monetary authorities may either maintain the current interest rate levels or consider a gradual reduction.
This confluence of factors – FX market stability, declining inflation, and potentially lower interest rates – is expected to create a favourable environment for the equities market,” he explained.
Amolegbe added that the recapitalisation exercise had already sparked increased investor participation, with foreign portfolio investments in Nigeria’s capital market rising from 4 per cent in mid-2023 to 16 per cent by November 2024. “The strong participation of local investors has also been remarkable, providing a stable market base and ensuring more sustainable growth,” Amolegbe added. Despite economic uncertainties, Nigeria recorded a GDP growth of 3.46 per cent in 2024, up from 2.54 per cent in 2023, driven largely by increased oil production, which rose to 1.52 million barrels per day. However, sectors such as agriculture and manufacturing struggled due to inflationary pressures, insecurity, and infrastructure deficits.
The equities market remained a bright spot, with the NGX All-Share Index (ASI) gaining 37 per cent in 2024, surpassing the 100,000-point mark for the first time. The oil and gas sector led with 159 per cent growth, while the banking sector recorded a 21 per cent gain, buoyed majorly by the recapitalisation exercise.
Looking ahead, Amolegbe projected a 39 per cent growth in the NGX-ASI for 2025, driven by anticipated major listings such as Dangote Refinery and NNPCL. “With the right policies, Nigeria is well-positioned to achieve transformative economic growth,” he stated.