Nigeria’s banking sector is undergoing one of its most far-reaching reforms in decades as deposit money banks race to raise an estimated N4.14 trillion in fresh capital ahead of the March 31, 2026 recapitalisation deadline, according to a report by global professional services firm, Deloitte.

The recapitalisation exercise, initiated by the Central Bank of Nigeria (CBN) in April 2024, is designed to strengthen the financial system, enhance resilience against macroeconomic shocks, and position Nigerian banks to support the country’s ambitious target of building a $1 trillion economy by 2030.

Why Banks Are Raising Fresh Capital

Under the new framework, the CBN raised minimum capital requirements significantly, setting thresholds at N500 billion for commercial banks with international licences, N200 billion for national licences, and N50 billion for regional banks. Merchant banks are required to maintain N50 billion, while non-interest banks must hold between N10 billion and N20 billion depending on their licence scope.

Unlike previous reforms, the apex bank adopted a stricter definition of capital, limiting it to paid-up share capital and share premium, while excluding retained earnings and other reserves. This approach effectively compelled nearly all banks to raise new funds, even those with shareholders’ funds above the minimum requirements.

Deloitte noted that the upward review became necessary as banks’ capital adequacy had been eroded by persistent macroeconomic pressures, including high inflation, rising interest rates, exchange-rate volatility, and foreign-exchange illiquidity.

“The revision will enable Nigerian banks to take on bigger risks, improve their liquidity position, and expand their loss-absorbing capacity in the face of domestic and external shocks,” the report said.

Nigeria banks’ capital adequacy, the report says, has been significantly impacted by macroeconomic challenges such as high inflation and interest rates, currency volatility and forex illiquidity.

“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,” the report said.

Progress So Far

Despite the scale of the task, progress has been significant. The CBN Governor, Olayemi Cardoso, disclosed that 27 banks have already raised capital through public offers and rights issues, with 16 banks fully meeting or exceeding the new capital thresholds well ahead of the deadline.

Speaking at the recent Bankers’ Dinner in Lagos, Cardoso said the recapitalisation process remains firmly on track.

“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.

“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,” he added.

“With just months to go, several banks have met the new requirements, while others are advancing steadily and are well positioned to comply comfortably before March 31, 2026,” he said.

Stress tests conducted by the CBN during the year further confirmed the sector’s resilience, with key financial soundness indicators remaining within regulatory benchmarks.

To protect the trillions of naira being injected into the banking system, the CBN is redesigning its credit-risk framework, with a focus on stronger governance, greater transparency, and firmer accountability. Cardoso said the objective is to avoid the boom-and-bust cycles that followed past 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 said.

A dedicated Compliance Department has also been established at the CBN to oversee financial crime supervision, market conduct, enterprise security, corporate governance, and Environmental, Social and Governance (ESG) compliance.

In addition, the Credit Risk Management System (CRMS) has been upgraded and web-enabled, allowing banks to submit statutory returns and conduct borrower checks in real time, with ongoing efforts to integrate it more closely with banks’ internal systems.

At its 303rd Monetary Policy Committee (MPC) meeting, the CBN-led committee expressed satisfaction with the banking system’s sustained resilience, noting that most financial soundness indicators remain within regulatory thresholds. The MPC also urged the apex bank to ensure a smooth and successful conclusion of the recapitalisation exercise.

Cardoso reiterated that while the system remains fundamentally sound, the CBN is vigilant against emerging risks such as cyber threats, credit concentration, and operational vulnerabilities. These, he said, are being addressed through enhanced risk-based supervision and Nigeria’s ongoing transition to Basel III, which will further strengthen capital quality and liquidity monitoring.

Link to the $1 Trillion Economy Vision

Beyond financial stability, the recapitalisation drive is seen as a critical enabler of Nigeria’s long-term growth ambitions. According to Cardoso, the existing capital base of Nigerian banks would be insufficient to service a $1 trillion economy without decisive reforms.

“A well-capitalised banking system is essential if we are to fund large-scale infrastructure, industrial projects, and the expansion of credit to MSMEs,” he said.

CBN Deputy Governor, Emem Usoro, echoed this view, describing recapitalisation as a key pillar of the national growth strategy, while UBA Group Managing Director, Oliver Alawuba, said the policy would strengthen banks’ ability to withstand economic shocks and finance long-term development.

Despite the higher capital thresholds, regulators have continued to reassure the public. The CBN maintains that the non-performing loan ratio remains within the five per cent prudential limit, while the liquidity ratio comfortably exceeds the 30 per cent regulatory minimum.

He said the apex bank is reinforcing operational discipline to ensure the financial system serves all Nigerians reliably.

“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. This holistic assessment enabled us to address root causes rather than symptoms.

“As a result, we recalibrated our cash-printing models, issued guidelines on the optimal ATM-to-card ratio, strengthened requirements for CBN approval before ATM or branch closures, enforced sanctions on banks whose ATMs fail to dispense cash, and intensified supervision of payment agents and POS operators nationwide,” he said.

As banks intensify capital-raising efforts ahead of the March 2026 deadline, analysts say the success of the recapitalisation programme will not only determine the future strength of Nigeria’s banking sector but also its capacity to drive sustainable economic growth in the years ahead. (Daily Trust)