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By Chinwendu Obienyi
Nigeria’s banking system is navigating one of the most defining moments in its history, and the verdict from regulators is that the sector remains fundamentally stable, sound and resilient.
Even as global and domestic headwinds persist, the Central Bank of Nigeria (CBN) says it is doubling down on vigilance, strengthening supervision and pressing ahead with a far-reaching recapitalisation programme designed to future-proof the financial system and position it to support the country’s long-term economic ambitions.
At the centre of this effort is the CBN Governor, Olayemi Cardoso, who has repeatedly stressed that while the banking system is healthy, complacency is not an option. Emerging risks, from cyber threats and operational weaknesses to credit-concentration pressures, are firmly on the regulator’s radar, and are being addressed through tougher risk-based supervision and Nigeria’s transition to the Basel III framework.
The renewed regulatory push is unfolding against the backdrop of a major recapitalisation exercise, which Cardoso describes as both timely and essential for sustaining financial stability and unlocking economic growth.
MPC affirms banking sector strength
The resilience of the banking system received strong validation at the 303rd meeting of the Monetary Policy Committee (MPC) held in Abuja. Members of the committee noted “with satisfaction” the sustained strength of the banking sector, observing that most financial soundness indicators remain comfortably within regulatory thresholds.
Beyond stability, the MPC also acknowledged tangible progress in the ongoing recapitalisation programme, with 16 banks already achieving full compliance with the revised minimum capital requirements. Committee members urged the CBN to sustain momentum and ensure a smooth and successful conclusion of the exercise.
That endorsement highlighted a growing consensus among policymakers that Nigerian banks are entering the recapitalisation phase from a position of strength, not distress, a sharp contrast to past episodes that were often triggered by systemic weaknesses.
Recapitalisation on track
With less than four months to the end of the recapitalisation window, the CBN insists the process is firmly on course. Speaking at the recent Bankers’ Dinner in Lagos, Cardoso said the response from the industry has been encouraging, both in scale and pace.
“To date, 27 banks have raised capital through public offers and rights issues, and sixteen have already met or exceeded the new requirements, a clear testament to the depth, resilience, and capacity of Nigeria’s banking sector,” he said.
He added that several other banks are making steady progress and are well positioned to meet the March 31, 2026 deadline without undue strain.
“As we strengthen the capacity of our banks, stress-testing this year confirms that Nigeria’s banking sector remains fundamentally robust. Key financial soundness indicators overwhelmingly satisfied prudential benchmarks during the year,” Cardoso said.
The recapitalisation drive, announced on March 28, 2024 and implemented from April 1, 2024, gives banks a 24-month window to comply with significantly higher capital thresholds. Commercial banks are now required to maintain minimum capital of N500 billion for international licences, N200 billion for national licences and N50 billion for regional licences. Merchant banks must meet a N50 billion minimum, while non-interest banks face thresholds of N20 billion for national licences and N10 billion for regional operations.
Protecting new capital, redesigning risk framework
As banks raise fresh capital, the CBN is keenly focused on ensuring that the funds are prudently deployed. To this end, the apex bank is redesigning the sector’s credit-risk framework to safeguard an estimated N4.14 trillion expected to be raised through the recapitalisation programme.
Cardoso said the CBN is enforcing stronger governance standards, deeper transparency and firmer accountability to prevent a repeat of the boom-and-bust cycles that accompanied earlier recapitalisation efforts.
“As recapitalisation progresses, we are redesigning the credit-risk framework to enforce stronger governance, greater transparency, and firmer accountability across the sector. We are determined to break the boom-and-bust cycle that has accompanied past recapitalisation efforts,” he stated.
Central to this effort is the enhancement of the CBN Credit Risk Management System (CRMS), which is now web-enabled. The system allows banks and other stakeholders to connect directly to the CRMS database for statutory returns and borrower status enquiries. The apex bank is also integrating the CRMS with other banking systems to improve efficiency, data quality and risk oversight.
In addition, the CBN has established a dedicated Compliance Department, now fully operational, with responsibility for financial crime supervision, market conduct, enterprise security, corporate governance and environmental, social and governance (ESG) standards.
According to Cardoso, these measures are designed to ensure that newly raised capital is not only preserved but channelled into productive lending that supports sustainable growth.
Why recapitalisation matters
Independent analysts agree that recapitalisation is a necessary response to Nigeria’s challenging macroeconomic environment. In a report titled “Nigeria’s macro headwinds trigger bank recapitalisation,” global audit firm Deloitte estimated that banks would need to raise about N4.14 trillion by the March 31, 2026 deadline.
The report noted that persistent inflation, elevated interest rates, currency volatility and foreign exchange illiquidity have eroded capital buffers across the industry.
“The upward revision will ensure that Nigerian banks have the capacity to take on bigger risks and stay afloat amid both domestic and external shocks. It also means increased liquidity position of banks, which will help broaden their loss-bearing capabilities,” Deloitte said.
From the regulator’s perspective, recapitalisation is not merely about compliance; it is about building institutions that can finance larger projects, absorb shocks and compete more effectively on the global stage.
Basel III and stronger supervision
Beyond recapitalisation, the CBN is accelerating Nigeria’s transition to Basel III, the global standard designed to strengthen bank capital, liquidity and risk management. Cardoso said the framework will further improve capital quality and enhance liquidity monitoring across the system.
“Nigeria’s banking system remains fundamentally sound and resilient, a cornerstone of our financial stability,” he said. “At the same time, we remain vigilant to emerging risks, including cyber threats, credit-concentration pressures, and operational vulnerabilities. These are being addressed through strengthened risk-based supervision and our ongoing transition to Basel III.”
Stress tests conducted this year, he disclosed, confirmed the robustness of the sector, with banks comfortably meeting prudential benchmarks across key indicators.
Reinforcing operational discipline
The CBN’s reform agenda extends beyond capital and risk frameworks to the everyday functioning of the financial system. Cardoso said the apex bank is reinforcing operational discipline to ensure reliable service delivery for Nigerians.
“Our starting point was a comprehensive, end-to-end review of the entire cash lifecycle: from production, to transportation, to distribution, and eventual access by consumers,” he explained. “This holistic assessment enabled us to address root causes rather than symptoms.”
As a result, the CBN has recalibrated its cash-printing models, issued guidelines on optimal ATM-to-card ratios, tightened requirements for approval before ATM or branch closures, imposed sanctions on banks whose ATMs fail to dispense cash, and intensified supervision of payment agents and POS operators nationwide.
These measures, according to the CBN, are aimed at restoring public confidence and ensuring that financial inclusion efforts translate into real access to cash and digital payment services.
Banking sector indicators remain strong
Despite the scale of the reforms underway, key indicators suggest the banking system remains on solid footing. Cardoso said non-performing loans (NPLs) remain within the prudential benchmark of five per cent, reflecting sound credit risk management.
“The banking sector liquidity ratio comfortably exceeds the regulatory floor of 30 per cent, a level which ensures banks are maintaining adequate cash flow to meet the needs of customers and their operations,” he said. “The recent stress test conducted also reaffirmed the continued strength of our banking system.”
Under the current recapitalisation programme, the CBN adopted a stricter definition of minimum capital, focusing on paid-up share capital and share premium, while excluding retained earnings and other reserves. This approach means that even banks with sizeable shareholders’ funds must raise fresh capital, reinforcing the quality and permanence of capital buffers.
Powering the road to a $1 trillion economy
The recapitalisation drive is closely linked to Nigeria’s broader economic aspirations, particularly the goal of building a $1 trillion economy by 2030. The Policy Advisory Council on the national economy has identified a strong, well-capitalised banking sector as a critical enabler of that ambition. Cardoso has been blunt about the stakes. “Will Nigerian banks have sufficient capital relative to the financial system’s needs in servicing a $1tr economy in the near future? In my opinion, the answer is ‘No!’ unless we take action,” he said. “That action was the ongoing recapitalisation of banks, meant to prepare them for expansion and attract big-ticket transactions to support economic growth.”
The CBN believes that stronger banks will be better positioned to finance large-scale infrastructure, support industrial expansion, and deepen credit to small and medium-sized enterprises (MSMEs).
“By enabling banks to extend more credit to MSMEs, we enhance job creation and productivity,” Cardoso said. “Furthermore, with increased capital, banks can invest in technology and innovation, crucial for driving digital financial services such as mobile money and agent banking.”
Industry and policy support
Senior CBN officials and industry leaders have echoed the governor’s views. Deputy Governor for Corporate Services, Ms. Emem Usoro, said achieving a $1 trillion economy requires “structured planning, clearly defined policies, unwavering implementation, and an inclusive approach that aligns public and private sector interests.”
“One of the key components of the $1 trillion ambition is the recapitalisation of Nigerian banks,” she said. “Banks must be sufficiently capitalised to meet the financial demands of a larger and more dynamic economy.”
“As we work towards building a $1 trillion dollar economy, we must consider the recapitalisation of our banks to be able to fund, finance and power the economy, and to favourably compete globally,” Usoro added.
From the industry side, the Group Managing Director of United Bank for Africa (UBA), Oliver Alawuba, described the policy as “timely and essential.”
According to him, recapitalisation will strengthen the sector’s ability to withstand shocks from inflation, currency volatility and global geopolitical disruptions, while placing banks on a stronger footing to finance Nigeria’s long-term transformation.
What the law requires
The CBN’s actions are firmly grounded in its statutory mandate. The 2007 CBN Act charges the apex bank with promoting financial system stability, alongside its core objective of price stability.
Over the years, the CBN has pursued this mandate through banking sector reforms, improved access to finance, institutional capacity building and the enforcement of good corporate governance practices.
Analysts note that financial system stability is critical because bank failures can erode public confidence, trigger contractions in money supply, reduce savings and investment, and disrupt payment systems, with severe consequences for the real economy.
A stable financial system also strengthens the transmission of monetary policy, making it easier for the central bank to achieve macroeconomic objectives.
Confidence, vigilance and the road ahead
As the recapitalisation exercise enters its final stretch, the CBN has reassured depositors, investors and the wider public that the banking system remains safe and sound.
“The CBN affirms that it continues to monitor all financial institutions under its regulatory purview and maintains robust frameworks for early warning signals and risk-based supervision,” the apex bank said. “These mechanisms ensure that any emerging issues are promptly addressed to protect the integrity of the financial system.”
Taken together, the reforms underway mark a decisive effort to strengthen Nigeria’s banking architecture, not just for today’s challenges, but for the demands of a larger, more complex economy. With capital rising, supervision tightening and risk management evolving, the CBN is betting that a resilient banking sector will remain a cornerstone of stability and a powerful engine for growth in the years ahead.
