The Central Bank of Nigeria (CBN’s) decision to embark on the recapitalisation of banks was to align monetary, fiscal policies with the Federal Government’s vision of prosperity for the people, businesses, and economy. The exercise, which is far underway, is recording significant successes, with successful capital raising by many banks and a surge in credit expansion to the domestic economy. CBN Governor, Olayemi Cardoso, explained that with stronger capital bases, banks can provide more loans to businesses and support the government’s quest for a $1 trillion economy.
Building bigger and stronger banks comes with great benefits to the banks, their customers, and the wider economy. For a government that wants to grow its economy to the $1 trillion mark, the support of the financial services sector led by the Central Bank of Nigeria (CBN) Governor, Olayemi Cardoso, is crucial.
The CBN Governor had explained that bank recapitalisation ensures that lenders are well-capitalised, enabling them to take on greater risks, particularly in underserved markets. With stronger capital bases, banks can provide more loans and financial products to Micro Small and Medium Enterprises (MSMEs), rural communities, and other vulnerable segments that have previously struggled to access formal financial services.
The CBN had on March 28, 2024, announced a two-year bank recapitalisation exercise which commenced on April 1, 2024, and is expected to end on March 31, 2026. The recapitalisation plan requires a minimum capital of N500 billion, N200 billion, and N50 billion for Commercial Banks with International, National, and Regional licenses, respectively. Others included merchant banks N50 billion; non-interest banks with national licence N20 billion, and non-interest banks with regional license will now have N10 billion minimum capital. The 24-month timeline for compliance ends on March 31, 2026.
Cardoso said the recapitalisation policy not only strengthens financial stability but also serves as a catalyst for inclusive growth. “By enabling banks to extend more credit to MSMEs, we enhance job creation and productivity. Furthermore, with increased capital, banks can invest in technology and innovation, crucial for driving digital financial services such as mobile money and agent banking. These technologies are keys to breaking down geographic and economic barriers, bringing financial services to even the most remote areas,” he stated.
He said Nigeria has what it takes to deepen financial inclusion and support the growth of business and economy, stressing that the recapitalization exercise would also support the government’s efforts to achieve a $1 trillion economy. The CBN further underscored the importance of banking recapitalisation as a major catalyst for the achievement of the $1 trillion economy agenda of the government.
Banking sector remains robust
Cardoso explained that the banking sector remains robust, with key indicators reflecting a resilient system. “The non-performing loan ratio remains within the prudential benchmark of five percent, showcasing strong credit risk management. The banking sector liquidity ratio comfortably exceeds the regulatory floor of 30 percent, a level that ensures banks are maintaining adequate cash flow to meet the needs of customers and their operations. The recent stress test also reaffirmed the continued strength of our banking system.
and pressures were not lost on the management of the CBN. We started early. If we had waited till now, the challenges would have been greater. But we acted in time,” he remarked.
Dr. Akinwumi expressed confidence that the recapitalisation requirements will be met, stressing that existing shareholders’ funds continue to serve as a buffer. However, the CBN deliberately opted for fresh capital inflows, particularly from foreign investors who have shown renewed confidence in Nigeria’s financial system. “International perception of Nigeria’s banking sector is improving. The reforms over the past year, especially around the foreign exchange regime and improved transparency regarding reserves, have boosted investor confidence,” he said. He cited recent disclosures on Nigeria’s net reserves and improvements in regulatory credibility as key factors that are reshaping the outlook for foreign direct investment in the banking sector