Nigeria's banking sector has completed its latest recapitalisation exercise with a stronger capital foundation. The Central Bank of Nigeria's recapitalisation programme, launched in March 2024, aimed to strengthen banks against shocks and improve their capacity to support a larger economy. The 24-month exercise, which ran from April 1, 2024, to March 31, 2026, required banks to meet higher minimum capital thresholds based on their licence categories.
The recapitalisation programme has mobilised about ₦4.65 trillion in fresh capital, with domestic investors accounting for 72.6 percent and international investors 27.4 percent. This gives banks a larger cushion against losses. However, the size of this cushion does not solely determine how resilient an institution will be when economic or financial conditions deteriorate. A bank with a stronger capital base is better positioned to absorb unexpected losses without threatening depositors or requiring external support.
The immediate benefit of higher capital is greater loss-absorption capacity. It also provides a stronger platform for expanding lending, investing in technology, and meeting the financing needs of a growing economy. However, capital is only one component of banking-sector resilience. A bank can meet its minimum capital requirement and still face pressure from deteriorating loans, excessive exposure to a particular sector, liquidity shortages, operational failures, or weak internal controls.
The quality of banks' assets will remain a major test. Rapid credit expansion without adequate underwriting and monitoring can weaken asset quality, while excessive concentration in particular borrowers or economic sectors can amplify losses when conditions change. Governance is equally important, as effective boards, independent oversight, strong risk functions, and proper controls determine how banks respond before financial problems become capital problems.
Liquidity also matters, as a well-capitalised bank can still come under pressure if it cannot meet its obligations when they fall due. The CBN's regulatory framework increasingly places emphasis on risk-sensitive supervision rather than capital levels alone. The Risk-Based Capital Requirement framework, issued in March 2026, places greater emphasis on the relationship between capital and the risks banks actually carry.
The post-recapitalisation challenge is broader than ensuring banks have enough money on their balance sheets. The CBN will need to ensure that stronger capital is accompanied by stronger risk management and that banks can withstand different economic scenarios without creating new vulnerabilities. Stress testing, concentration limits, liquidity management, and effective resolution frameworks will become increasingly important as the regulator moves away from treating minimum capital as the main measure of strength.
The stronger capital base creates room for banks to expand lending and support investment, but the quality of that lending will matter. The recapitalisation exercise has addressed an important structural weakness by giving banks a stronger financial foundation. The next question is whether that foundation can support a banking system that is better-governed, more resilient to shocks, more disciplined in risk-taking, and more effective at financing productive economic activity.
Key points
- The Central Bank of Nigeria's recapitalisation programme has mobilised about ₦4.65 trillion in fresh capital.
- The quality of banks' assets and governance will remain major tests for the banking sector.
- The post-recapitalisation challenge is broader than ensuring banks have enough money on their balance sheets.
