N5tn capital injection sparks banking sector transformation

With a N5tn capital injection nearing completion, Nigeria’s banking sector stands on the cusp of sweeping transformation, poised to power economic expansion and resilience, OLUWAKEMI ABIMBOLA reports

By March 31, the ongoing recapitalisation of banks spearheaded by the Central Bank of Nigeria is expected to conclude. Widely regarded as one of the most far-reaching reforms undertaken by the apex bank under its Governor, Olayemi Cardoso, the exercise is set to produce larger, more sophisticated financial institutions capable of supporting the Federal Government’s $1tn economic aspiration.

The CBN has consistently advanced a vision anchored on regulatory excellence and the strengthening of Nigeria’s financial system integrity and resilience. With N4.05tn already secured by 20 banks, the programme is shaping up to be a landmark success, with far-reaching implications for businesses and the broader economy.

As the month draws to a close, the capital-raising phase of the recapitalisation programme will be wrapped up. Industry estimates suggest that no less than N5tn could be mobilised by the end of the exercise. While the deadline is imminent, analysts believe the benefits will endure for decades.

A key outcome of the policy is the emergence of stronger banks equipped to execute large-ticket transactions and provide the scale of financing required to stimulate economic expansion.

The CBN leadership maintains that sustainable economic growth is unattainable without a resilient financial system. Consequently, the regulator has prioritised closer coordination between monetary and fiscal authorities to advance the government’s ambition of expanding the economy to $1tn.

For Cardoso, entrenching a culture of compliance and enhancing risk management frameworks remain central to safeguarding Nigeria’s financial architecture and preserving its credibility both locally and internationally.

In pursuit of these objectives, the apex bank has reiterated its dedication to a transparent and robust financial system by tightening regulatory compliance standards and strengthening risk management practices across financial institutions.

Milestones in recapitalisation

In his most recent public briefing ahead of the March 31 deadline, Cardoso confirmed that 20 banks had already met the revised capital thresholds, while others were in the process of raising additional funds.

Beyond capital raising, the recapitalisation framework mandates that newly raised equity must undergo rigorous verification before allotment proposals are cleared and funds are released for finalisation of offers and inclusion in capital bases.

The CBN serves as the final signatory in a tripartite capital verification committee comprising the Securities and Exchange Commission and the Nigeria Deposit Insurance Corporation. The committee is tasked with scrutinising funds mobilised under the recapitalisation drive to ensure transparency and compliance.

Cardoso emphasised that Nigeria’s banking system remains fundamentally sound and resilient, describing it as a pillar of financial stability. “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, which will further bolster resilience, improve capital quality, and strengthen liquidity monitoring,” he said.

With only months left before the deadline at the time of his remarks, Cardoso stressed that the programme was progressing as planned. “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.

The governor also noted that the CBN had intensified efforts to promote operational discipline across the system. “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 explained.

Addressing bankers recently, Cardoso underscored that ethics and professionalism within the industry are under continuous evaluation. He disclosed that the FX Global Code had been introduced for authorised dealers and market participants to promote strict adherence to standards.

He urged the Chartered Institute of Bankers of Nigeria to champion best practices and uphold the highest professional benchmarks. “At the Central Bank, we have intensified surveillance of market activities to ensure compliance and eliminate bad actors who attempt to undermine the system. Together, we must build a market based on strong governance and transparency. As regulators, we will maintain a zero-tolerance approach to compliance violations,” he said.

Country Director of the World Bank in Nigeria, Matthew Verghis, highlighted recapitalisation as both a stabilisation tool and a catalyst for transformation. “A stronger banking system creates the foundation to finance Nigeria’s long-term ambitions — from empowering MSMEs and expanding productive capacity to unlocking large-scale infrastructure development.

“The opportunity before us is clear: to convert stronger balance sheets into deeper intermediation, greater resilience, and inclusive growth that accelerates Nigeria’s journey toward a more competitive and sustainable economy,” he said.

Head of Financial Institutions Ratings at Agusto & Co, Ayokunle Olubunmi, observed that several banks categorised as being in advanced stages of compliance had already secured the required funds.

“You’ll be shocked that a lot of those that the CBN said are at an advanced stage, some of them already have the funds with the CBN. What CBN is doing is verifying those funds. So, it’s not that they are still going into the markets looking for the funds. The bulk of them have actually raised the funds,” he said.

The Group Managing Director of United Bank for Africa, Oliver Alawuba, described the recapitalisation initiative as both timely and indispensable for positioning the financial system to meet the demands of a growing and globally competitive economy.

According to him, the policy will reinforce the sector’s resilience against shocks such as inflationary pressures, exchange rate volatility, and geopolitical disruptions. He noted that it would also enable banks to finance transformative projects spanning infrastructure and industry.

Alawuba stressed that the exercise goes beyond meeting regulatory benchmarks. Rather, it is a forward-looking approach designed to equip Nigerian banks with the scale and sophistication required for a trillion-dollar economy.

“Nigerian banks need adequate capital buffers to meet the evolving demands of these sectors. Without this, the industry cannot effectively rise to the challenge,” he said.

Building a resilient system

Cardoso reiterated that banking sector indicators remain strong. “The non-performing loan ratio remains within the prudential benchmark of five per cent, showcasing strong 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. The recent stress test conducted also reaffirmed the continued strength of our banking system,” he said.

He recalled that plans to bolster capital buffers were unveiled in 2023 with a two-year implementation timeline. “I am pleased to note that a significant number of banks have raised the required capital through rights issues and public offerings well ahead of the 2026 deadline. I believe that the banking sector is in a strong position to support Nigeria’s economic recovery by enabling access to credit for MSMEs and supporting investment in critical sectors of our economy,” he stated.

Founder and Chief Consultant of B. Adedipe Associates Limited, Abiodun Adedipe, outlined key policy adjustments yielding positive economic outcomes. He pointed to foreign exchange reforms that curtailed arbitrage and round-tripping, petrol subsidy removal that eliminated an estimated annual waste of $10.7bn while fostering competition, and bank recapitalisation that is producing stronger institutions capable of financing a $1tn economy.

He added that fiscal consolidation efforts are plugging leakages, deploying technology to enhance accountability, and expanding fiscal space at sub-national levels.

Adedipe described tax reforms as a potential game-changer capable of stimulating regional competition. He also referenced initiatives such as the Nigerian Education Loan Fund, Consumer Credit Corporation, recapitalised Bank of Agriculture, National Credit Guarantee Company Ltd, and single-digit interest mortgage schemes as important measures to sustain growth.

He noted that Nigeria’s demographic advantages — including an estimated population of 237.53 million as of July 2025 and a median age of 18.1 years — provide a solid base for expansion. Rapid urbanisation and rising internet penetration further strengthen growth prospects.

Fiscal-monetary coordination

The CBN emphasised that monetary reform cannot succeed in isolation. Improved alignment with fiscal authorities has enhanced macroeconomic stability, lowered domestic borrowing costs, improved liquidity, and increased predictability in fiscal operations.

Cardoso highlighted the discontinuation of direct deficit financing as a firm commitment to discipline.

“This stance is unequivocal as there will be no return to the practice of financing fiscal deficits by the Central Bank. In parallel, the fiscal authorities have embarked on key institutional reforms – including the implementation of a Revenue Optimisation (RevOp) framework, the establishment of a new National Revenue Agency, and upgrades to the Treasury Single Account – to strengthen revenue mobilisation and public financial management,” he said.

“As we transition towards a full-fledged inflation-targeting framework, this partnership will deepen, ensuring fiscal and monetary policies reinforce each other in delivering durable price stability,” he added.

As the March 31 deadline approaches, stakeholders broadly agree that the recapitalisation drive represents a defining chapter in Nigeria’s banking evolution — one designed not only to fortify financial institutions but also to underpin the country’s long-term economic ambitions. (Punch)