Sunday Ugwu looks at Nigeria's bank recapitalisation exercise and the implications for the financial sector.
The bank recapitalisation exercise that started 23 months ago has entered the last lap.
In late February, Central Bank of Nigeria governor Olayemi Cardoso gave an update on the plan:
"With regard to the ongoing recapitalisation programme, the Committee noted that of the 33 banks that have raised additional capital, 20 have met the new minimum capital requirement, reaffirming steady progress towards a more robust and well capitalised financial system," he said.
A further statement from the CBN has now put the number at 30. "As of March 6, 2026, thirty banks have met the new capital requirements applicable to their respective licences," said Mrs. Hakama Sidi Ali, Acting Director of Corporate Communications at the CBN.
Cardoso went on to explain that as of February 19, 2026, the total verified and approved capital raise stands at N4.05 trillion. Of this, N2.90 trillion - 71.67% - was mobilised domestically, while $706.84m (N1.15 trillion) - 28.33% - came from foreign participation.
He said, "this balance represents a mix of domestic and foreign participation and signals broad investor engagement and confidence in the sector."
Banking analysts had earlier expressed fears that the recapitalisation exercise could exacerbate existing economic pressures, given low oil prices, high inflation, and foreign exchange volatility at the time of the commencement of the daunting task.
Reacting to the governor's com-ments, Uche Uwalake, professor of capital markets and president of the Institute of Capital Market Academics, said: "the recapitalisation drive by the Central Bank of Nigeria is, in my view, one of the most significant policy moves in the financial sector in recent years. The fact that 20 out of 33 banks have already met their new capital thresholds - ahead of the March 31, 2026 deadline - sends a strong signal about the underlying resilience of Nigeria's banking industry."
Why recapitalisation in the first place?
In a recent report, Nigerian financial services firm Afrinvest said that the exercise was triggered by the erosion of banks' capital buffers since 2010.
"Using the 2023 average, the existing minimum capital size has lost 77.1% and 76.5% in FX and real terms, respectively. To shore up the capital gap, the CBN considered the impact of macroeconomic headwinds on banks' risk profiles and financial position in defining the new threshold," the report said.
What will happen to those who fail to meet their target? Speaking on Friday, 10 October 2025, Cardoso has said that banks unable to meet the ongoing recapitalisation target may have to downgrade their banking licences. He, however, stressed that there is no need for undue panic.
"With the banking recapitalisation, we left the door open in terms of the category of banking licence you decide to adopt," Cardoso said. "If you feel that you cannot meet your capital requirement, you can downgrade your licence and move into another category of banks. You don't need to merge if you don't have to - but if you want to merge, go ahead."
Uwaleke said the recapilisation programme is preparing Nigerian banks for the future.
"First, it speaks to preparedness and adaptability. Nigerian banks have experienced multiple reform cycles, from the 2005 consolidation era to post-2009 crisis reforms, and that institutional memory appears to be paying off. Raising over N4 trillion from the capital market within a relatively short window demonstrates investor confidence, both domestic and foreign. Investors typically do not commit that scale of funding unless they believe in the long-term viability and profitability of the institutions."
For Abiola Rasaq, a capital markets expert, "it's exciting news that more than half of the banks have met the new capital requirement ahead of the March 31st deadline."
"I am optimistic that a few more, which are currently undergoing the capital verification stage with the tripartite regulators, CBN, NDIC [Nigeria Deposit Insurance Corporation] and SEC [Securities and Exchange Commission], would also meet the requirement in the weeks ahead to cross the finish line. I would expect some mergers afterwards, and I believe the CBN and NDIC have adequate plans for a seamless transition of customers of any bank which is not able to meet the capital requirement either through new capital injection or merger."
Speaking on the expected positive outcomes from the recapitalisation exercise, Rasaq said: "We are seeing banks warming up towards the SMEs, and there is increasing appetite for mortgage lending. These are early offshoots of the improved liquidity of banks arising from the recapitalisation exercise. For instance, banks' liquidity ratio stands at around 60%, twice the minimum requirement of 30% and a notable increase from 46% a year ago. Capital adequacy ratio and single obligor limits of banks have also increased, so they are now able to finance large ticket transactions."
The top 5 banks now have equity of about N19 trillion, suggesting the capacity of the FUGAZ (First Bank, UBA, Guaranty Trust Bank, Access and Zenith) to syndicate a N3.5 trillion loan for a project.
Looking ahead
"The recapitalisation programme provides a strong foundation on which a trillion-dollar economy can be built." Razaq believes.
However, he argued that there needs to be discipline in lending to ensure that banks keep their loan books under control.
"There is a need to ensure discipline in credit creation to avoid undue nonperforming loan (NPL) bubbles. Notably, following the end to forbearance on loan classification, the average NPL in the banking sector has risen to 7%, which is way above the 5% tolerance threshold of the CBN. Given the strong liquidity in the sector, there is a tendency for moral hazards like we had after the 2006/07 sector recapitalisation; hence, the need for regulators to sustain the risk-based supervision to ensure disciplined growth in the credit portfolio."
Other areas of concern analysts pointed out would be the need for the CBN to provide guidance on bank's dividend payout ratio to ensure that there is a prudent balance between shareholders' expectations on dividends and profit retention to grow the business.
This special report was produced with the support of the Central Bank of Nigeria. The editorial was produced independently of the CBN or the government.