CBN warns banks against excessive risk-taking

The Central Bank of Nigeria (CBN) has warned banks against excessive risk-taking, urging boards and management to strengthen corporate governance, internal controls and risk management to safeguard the stability of the financial system.

The Deputy Governor, Corporate Services, of the CBN, Dr Muhammad Sani Abdullahi, gave the warning yesterday at the 38th Seminar for Finance Correspondents and Business Editors, organised by the Finance Correspondents Association of Nigeria (FICAN) in Abuja.

Speaking on the theme, “Towards a Robust and Resilient Financial System in the Post-Banking Sector Recapitalisation Era”, Abdullahi said stronger capital buffers must be matched by sound management and prudent lending.

“Boards and management teams must demonstrate integrity, accountability and transparency, strengthen internal controls and guard against excessive risk-taking. Their decisions must protect the interests of depositors, investors and other stakeholders,” he said.

The CBN deputy governor said banks must extend risk management beyond credit risk to cover market, liquidity and operational risks, as well as cybersecurity, third-party dependencies and climate-related financial risks.

He said the apex bank would continue to pay close attention to governance, asset quality, liquidity and large exposures, while also expecting banks to protect customer data, maintain reliable payment services and recover quickly from disruptions.

Abdullahi said the CBN’s supervisory approach would continue to focus on risk-based supervision, macroprudential surveillance and enhanced stress testing, alongside consumer protection, fintech regulation, responsible innovation, crisis preparedness and resolution planning.

On the banking sector recapitalisation, he said 33 banks had met the revised minimum capital requirements and raised N4.65 trillion under the two-year programme.

He said, however, that the success of the exercise should not be measured only by the amount of capital raised, but by the quality of banking services and productive lending it supports.

The deputy governor urged banks to deploy their stronger balance sheets to finance agriculture, manufacturing, services and infrastructure, stressing that lending decisions must be based on viable projects.

He said Nigeria’s ambition to build a $1 trillion economy by 2030 would require banks capable of mobilising and allocating capital on a much larger scale.

According to him, stronger capital buffers would enable banks to finance long-term infrastructure, support industrial expansion, facilitate international trade and compete more effectively in regional and global markets.

Abdullahi also urged banks to prepare for emerging risks from geopolitical uncertainty, climate change, cyber threats and rapid technological developments. He said the benefits of recapitalisation should extend to rural communities, women, young entrepreneurs and other underserved groups through greater financial inclusion.

“Consumer protection and financial inclusion are integral to resilience: a system that people can access, understand and trust is better able to support lasting growth,” he said.

The deputy governor assured that the CBN would remain vigilant in supervising banks in the post-recapitalisation era, stressing that stronger balance sheets must be matched by sound governance, responsible lending and effective risk management.

Earlier, the Director, Corporate Communications and Investor Relations Department, CBN, Mickeal Chukwuemeka, said the completion of the recapitalisation exercise had shifted the focus from raising capital to how banks deploy the additional funds.

According to him, the key issue was whether stronger bank balance sheets would translate into a financial system capable of absorbing shocks, financing productive economic activities and maintaining public confidence.

Chukwuemeka urged financial correspondents and business editors to go beyond headlines and ask follow-up questions to provide the context needed for Nigerians to understand monetary policy and financial sector reforms.

He said accurate reporting was critical to public understanding of monetary policy and financial sector reforms, urging journalists to seek clarification from the CBN whenever issues were unclear.