How Nigeria's Recapitalised Banks Will Boost Businesses and Drive $1 Trillion Economy
On November 24, 2023, Central Bank of Nigeria (CBN) Governor Olayemi Cardoso first announced plans to recapitalise the banking sector, setting ambitious goals to drive business growth and support the Federal Government's $1 trillion economy project. Analysts have praised the success of this two-year exercise, expressing confidence that with larger and more resilient banks, Nigeria's financial sector is well-equipped to foster sustainable growth and enhance real sector productivity.
Recapitalisation Timeline and Achievements
When Dr. Olayemi Cardoso called for banks to prepare for a new round of recapitalisation, many experts saw it as a timely initiative. The CBN boss followed through, establishing a two-year timeline that concluded on March 31, 2026. This milestone marks the beginning of an era with over 32 resilient and highly capitalised banks raising N4.61 trillion, determined to propel business and economic growth forward.
The recapitalised banks are expected to play a crucial role in the Federal Government's drive to achieve a $1 trillion Gross Domestic Product (GDP) target by 2031. Cardoso emphasised that Nigerian banks needed to raise new capital to have sufficient resources relative to the financial system's needs in servicing a $1 trillion economy in the near future.
Strategic Goals and Economic Reforms
Cardoso outlined that the administration, as detailed in the Policy Advisory Council report on the national economy, has set a clear goal of reaching a GDP of $1 trillion, with defined priority areas and strategies. Achieving this target requires sustainable and inclusive economic growth at a significantly higher pace than current levels.
The government has already embarked on this journey through fiscal reforms, including the removal of petrol subsidies and the unification of the foreign exchange market rate. Cardoso reaffirmed the stability of the banking sector, noting that despite challenging global and domestic macroeconomic conditions, Nigeria's financial sector has shown resilience, with key indicators of financial soundness largely meeting regulatory benchmarks.
Capital Requirements and Regulatory Framework
The recapitalisation plan mandates minimum capital levels of N500 billion for commercial banks with international licences, N200 billion for national licences, and N50 billion for regional licences. The 24-month compliance period ended on March 31, 2026. Cardoso stated that the CBN will enforce stronger governance, greater transparency, and firmer accountability to protect the raised funds.
To this end, the CBN has established a dedicated Compliance Department, now fully operational, with mandates covering financial crime supervision, market conduct, enterprise security, corporate governance, and Environmental, Social, and Governance (ESG) criteria. The process of enforcing stronger controls on raised funds is ongoing, with a redesign of the credit-risk framework to ensure proper management by financial institutions.
Addressing Past Challenges and Future Risks
In the past, banks were often flooded with post-recapitalisation funds, and analysts warned that without proper risk management and regulatory controls, there was a high risk of misapplying these funds through risky loans. To prevent such occurrences, Cardoso emphasised, "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."
In a report titled "Nigeria's Macro Headwinds Trigger Bank Recapitalisation," global accounting firm Deloitte highlighted that the upward review of banks' capital base is essential to boost the capital adequacy needs of the Nigerian financial industry. The report noted that Nigeria's banks' capital adequacy has been significantly impacted by macroeconomic challenges such as high inflation, 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 stated.
Stakeholder Perspectives and Economic Impact
President of the Bank Customers Association of Nigeria (BCAN), Dr. Uju Ogubunka, remarked that the exercise, which saw 32 banks raising N4.61 trillion, presents an opportunity for lenders to provide cheaper loans, expand operations, and offer improved services to customers. CEO of Economic Associates, Dr. Ayo Teriba, urged the CBN to review the Cash Reserve Ratio (CRR) policy to allow banks to utilise funds raised from the recapitalisation exercise.
Teriba pointed out that with Ways and Means dropping from N27 trillion to N3 trillion, stability in exchange rates, and adequate FX reserves, the CBN should reconsider the CRR policy to enable banks to intermediate effectively. The CBN has set the Cash Reserve Requirement at 45.00% for Deposit Money Banks, 16.00% for Merchant Banks, and 75.00% for non-Treasury Single Account (TSA) public sector deposits.
President of the Association of Bureaux De Change Operators of Nigeria (ABCON), Dr. Aminu Gwadabe, echoed the need for low-interest loans, stating, "We need cheaper loans. Big capital should reflect on cheaper and more affordable loans. Also, banks should lend for longer terms and support projects that bolster the economy." He added that increased capital will enhance banks' buffers and accelerate Nigeria's path to achieving a $1 trillion economy.
"Now they have bigger capital, we expect the banks to come out and compete with other global banks. The Nigerian banks need to compete favourably at the international stage," Gwadabe emphasised.
Global Support and Future Outlook
Country Director of the World Bank in Nigeria, Matthew Verghis, underscored the importance of positioning recapitalisation as a tool for economic transformation and highlighted the strategic opportunities ahead. "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, noted that many banks classified as being at an advanced stage of compliance have already secured the required funds. "Some of those that the CBN said are at an advanced stage already have the funds with the CBN. What CBN is doing is verifying those funds. So, it's not that they are still going in the markets looking for the funds," he explained.
Strengthening the Banking Sector
Cardoso earlier highlighted that within the banking sector, key indicators reflect a resilient system. The non-performing loan ratio remains within the prudential benchmark of five per cent, demonstrating strong credit risk management. The banking sector liquidity ratio comfortably exceeds the regulatory floor of 30 per cent, ensuring adequate cash flow to meet customer and operational needs. Recent stress tests have reaffirmed the continued strength of Nigeria's banking system.
Founder and Chief Consultant of B. Adedipe Associates Limited (BAA Consult), Prof. 'Abiodun Adedipe, listed major policy shifts yielding positive results for the economy. He noted that the CBN has eliminated arbitraging and roundtripping opportunities through forex market reforms, while the removal of petrol subsidies has ended an annual waste of US$10.7 billion and fostered competition. Bank recapitalisation is creating stronger banks to fund a US$1 trillion economy, and fiscal consolidation is plugging leakages, deploying technology, and making government agencies more accountable.
As the CBN explained, monetary reform cannot be effective in isolation. Alignment with fiscal policy has strengthened Nigeria's macro stability, yielding tangible results such as reduced domestic borrowing costs, improved liquidity conditions, and more predictable fiscal operations. For instance, the discontinuation of direct deficit financing signals a commitment to fiscal discipline.
This comprehensive recapitalisation effort positions Nigeria's banking sector as a key driver in achieving economic transformation and sustainable growth, paving the way for a more robust and competitive financial landscape.
