Big banks grow stronger as capital buffers cross 20% after fresh funding drive

By Chinwendu Obienyi

Nigeria’s biggest banks have become financially stronger, with their Capital Adequacy Ratios (CAR) rising above 20 per cent after a major fundraising push ordered by the Central Bank of Nigeria (CBN), insiders told Daily Sun at the weekend.

With their CAR rising above 20%, it means they now have more money set aside compared to the loans and risks they carry. In simple terms, they are better protected if customers default or the economy gets shaky.

The development marks a significant milestone in the regulator’s effort to fortify the banking system against macroeconomic shocks and position banks for broader regional expansion.

The 24-month recapitalisation exercise, which set minimum capital requirements at N500 billion for international banks and N200 billion for national banks, has driven a wave of capital raising across the industry.

Collectively, banks have raised over N2.4 trillion, boosting their capacity to absorb losses and support larger-scale lending activities.

For tier-1 banks, the immediate impact has been a sharp rise in capital buffers. With CAR levels now comfortably above regulatory thresholds, these banks are better positioned to weather volatility stemming from inflation, exchange rate fluctuations, and global economic uncertainty.

Analysts say the stronger capital base also enhances confidence among investors and depositors, reinforcing overall financial system stability.

However, the improved capital position comes with trade-offs. Higher capital levels tend to dilute returns, particularly Return on Equity (ROE), as banks deploy larger balance sheets to generate earnings. At the same time, stricter regulatory requirements, such as increased provisioning for impaired loans, are expected to weigh on profitability in the near term.

The end of COVID-era regulatory forbearance has further reshaped the sector’s outlook. Previously, banks were allowed to restructure and reclassify certain loans, particularly in the oil and gas sector, in ways that suppressed reported non-performing loan (NPL) ratios. With the withdrawal of these measures, lenders are now recognising more credit risks on their books, pushing NPL ratios higher across the industry.

Despite this, market observers view the shift as a positive correction rather than a deterioration in asset quality.

“What we are seeing is a transition to more transparent balance sheets. The numbers may look worse on paper, but they reflect a more accurate and sustainable position”, a banking analyst who spoke to Daily Sun on the condition of anonymity.

Looking ahead, tier-1 banks are expected to leverage their strengthened capital base to expand across Africa, particularly within the framework of the African Continental Free Trade Area (AfCFTA). Increased cross-border banking activities and trade finance opportunities are likely to drive nominal loan growth, which analysts project could exceed 20 per cent in the current financial year.

Yet, constraints remain. The CBN’s high Cash Reserve Ratio (CRR), currently at 45 per cent of naira deposits, continues to limit the amount of funds banks can deploy for lending.

In addition, new regulatory measures, such as restrictions on dividend payments for banks that fail to meet capital and provisioning benchmarks, underscore the central bank’s cautious stance.

Even so, the broader outlook for Nigeria’s banking sector appears more resilient. While balance sheets in 2026 may appear more complex due to higher recognised risks, they are also more credible, backed by stronger capital and tighter regulatory oversight.

For tier-1 banks, crossing the 20 per cent CAR threshold is not just a numerical achievement, it signals a structural shift toward a more robust, transparent, and globally competitive banking system.