Recapitalisation is foundation, not finish line for banking sector – CBN
CBN Headquarters
Nike Popoola
The Central Bank of Nigeria (CBN) has said the successful completion of the banking sector recapitalisation programme should be regarded as the beginning of a new phase of building a stronger and more resilient banking system, rather than the end of banking sector reforms.
The Director, Banking Supervision, CBN, stated this in a paper presented at the Finance Correspondents’ Association of Nigeria (FICAN) seminar.
According to the paper, the recapitalisation programme, announced on March 28, 2024 and implemented between April 1, 2024 and March 31, 2026, resulted in the mobilisation of approximately ₦4.65tn in fresh capital.
It said 72.6 per cent of the capital was sourced domestically, while 27.4 per cent came from international investors. Consequently, 33 licensed banks met the revised minimum capital requirements, which the CBN said reflected strong investor confidence in the Nigerian banking sector.
The Director, however, stressed that increased capital alone would not guarantee financial resilience.
“Capital adequacy is therefore a necessary condition for resilience, but not a sufficient one,” the paper stated.
It identified corporate governance, asset quality, liquidity, enterprise-wide risk management, operational and cyber resilience, macroprudential resilience, and effective recovery and resolution frameworks as key pillars required to sustain a resilient banking system.
According to the CBN, weaknesses in one area can quickly affect others. Poor governance, for instance, can lead to weak underwriting, which may deteriorate asset quality, erode capital and create liquidity pressures.
The paper also highlighted the importance of regulatory forbearance, noting that the CBN had been gradually withdrawing temporary measures introduced during periods of severe economic stress.
It said the withdrawal of forbearance was intended to restore normal prudential standards, improve transparency and ensure that risks were accurately identified, measured and managed.
The CBN further identified stress testing as an important tool for assessing how banks would perform under severe but plausible scenarios, including high inflation, exchange rate depreciation, recession, rising interest rates, increased loan defaults, cyberattacks and market disruptions.
It said the Risk-Based Capital Requirement (RBCR) Framework issued in March 2026 would align the level of capital held by banks with the specific risks inherent in their operations.
The framework, according to the paper, complements stress testing and the Internal Capital Adequacy Assessment Process (ICAAP), shifting supervision towards a more forward-looking and risk-sensitive approach.
The CBN also stressed the importance of loan portfolio diversification, noting that excessive concentration in borrowers, sectors, geographic regions or asset classes could weaken banks’ resilience.
It said strong corporate governance remained critical as banks expand their balance sheets and deploy fresh capital.
The CBN concluded that the post-recapitalisation phase would focus on resilience, including stronger governance, risk management, stress testing, operational resilience, disciplined credit allocation and effective supervision.
