The Central Bank of Nigeria (CBN) has emphasized the need for banks to strengthen their risk management and corporate governance practices alongside increasing their capital buffers. This warning was given by Dr. Muhammad Sani Abdullahi, Deputy Governor, Corporate Services at the CBN, during the 38th Seminar for Finance Correspondents and Business Editors. He stressed that capital is only the starting point for building a resilient banking system.
According to Abdullahi, the recapitalization process is now complete, but banks must go beyond just increasing their capital. They must strengthen their controls, identify risks early, and lend based on viable projects. He noted that geopolitical uncertainty, climate-related risks, cyber threats, and rapid technological change pose significant risks to the banking sector. These risks can transmit shocks across borders, affecting capital flows, exchange rates, and external buffers.
The CBN Deputy Governor highlighted the importance of corporate governance in ensuring the banking sector's resilience. He emphasized that boards and management must demonstrate integrity, accountability, and transparency, while strengthening internal controls and guarding against excessive risk-taking. Their decisions must protect the interests of depositors, investors, and other stakeholders.
Abdullahi further stressed that banks' risk management must extend beyond credit risk to market, liquidity, and operational risks, as well as cybersecurity, third-party dependencies, and climate-related financial risks. The CBN will continue to focus on governance, asset quality, liquidity, and large exposures, while expecting banks to protect customer data, maintain reliable payment services, and recover quickly from disruptions.
On digital banking, Abdullahi emphasized the need for banks to continuously invest in cybersecurity, data protection, disaster recovery, and business continuity. He noted that innovation brings opportunities, but public trust depends on customers being able to transact securely and access their funds reliably, even when systems come under pressure.
The CBN's supervisory approach will continue to emphasize risk-based supervision, macroprudential surveillance, and enhanced stress testing, alongside financial sector coordination, consumer protection, fintech regulation, and responsible innovation. Abdullahi also stressed that the impact of stronger bank balance sheets should be reflected in productive lending and improved financial services across the economy.
Finally, Abdullahi noted that the benefits of recapitalization should extend to rural communities, women, and young entrepreneurs. He emphasized that consumer protection and financial inclusion are integral to financial stability. The CBN expects banks to assess their recapitalization by the quality of banking services and productive lending they support, as well as by the amount of capital raised.
Key points
- Banks must match stronger capital buffers with tighter risk management and sound corporate governance.
- The CBN will continue to focus on governance, asset quality, liquidity, and large exposures.
- The impact of stronger bank balance sheets should be reflected in productive lending and improved financial services across the economy.
