What Nigerians should know about CBN’s bank recapitalisation, effects on economy

What Nigerians should know about CBN’s bank recapitalisation, effects on economy

This is where many Nigerians have legitimate questions, particularly regarding the three banks that did not meet the deadline: Union Bank, Keystone Bank, and Polaris Bank.

When the Central Bank of Nigeria announced in March 2024 that commercial banks had two years to significantly beef up their capital bases, the directive triggered one of the most intense fundraising seasons in the country’s financial sector.

Rights issues, public offers, mergers, private placements, banks pulled every lever available.

By the March 31, 2026, deadline, 33 of Nigeria’s regulated banks had crossed the finish line, collectively raising N4.65 trillion in fresh capital. It is, by any measure, the most significant structural reform of the Nigerian banking sector since 2005.

Why recapitalisation?
To understand what has changed, it helps to understand why the CBN acted.

The last time Nigeria undertook a major bank recapitalisation was between 2004 and 2005 under the then-CBN governor, Charles Soludo.

Banks were required to raise their minimum capital from N2 billion to N25 billion, a policy that drove mergers and acquisitions and reduced the number of lenders from 89 to 25.

Nigeria’s banking sector had been operating under capital thresholds set in 2005, which made sense for an economy of that era but had become increasingly inadequate for a country aiming to reach $1 trillion in GDP.

A bank’s capital is essentially its financial buffer, the cushion that absorbs losses before depositors’ funds are ever touched.

A thinly capitalised bank can be disrupted by economic turbulence. A well-capitalised one can weather storms, keep lending, and support growth even when conditions deteriorate.

“Sustainable economic growth is unattainable without a resilient financial system. This recapitalisation ensures Nigerian banks can fund the scale of transactions needed to drive a $1 trillion economy,” CBN governor Olayemi Cardoso said.

The new capital requirements reflect that ambition. International banks, those operating across borders, must now hold a minimum of N500 billion. National banks must hold N200 billion, and regional banks must hold N50 billion.

These figures represent a dramatic leap from previous benchmarks and are designed to produce banks capable of meaningfully financing infrastructure, energy, manufacturing, and the large-scale projects a bigger economy demands.

How banks moved the needle
Meeting those targets required creativity and urgency in equal measure. Larger banks moved early. Guaranty Trust Bank raised N209 billion through a public offering, then listed shares on the London Stock Exchange, pulling in an additional $105 million from international investors.

Zenith Bank completed its recapitalisation, raising more than N350 billion through a mix of rights issues and public offers. Its share capital has now reached N614 billion, exceeding the minimum requirement for international banks.

Access Bank raised N351 billion through a rights issue, becoming the first lender to meet the new N500 billion capital requirement.

The offer comprised 17.77 billion ordinary shares at N19.75 each, lifting its total share premium and paid-up capital to N602.8 billion-N102.8 billion above the CBN threshold.

First Bank, UBA, and the rest similarly completed their capital raises ahead of the deadline.

Others took a different route.

Union Bank completed a merger with Titan Trust Bank, a strategic combination that pooled resources and accelerated compliance faster than either institution could have managed alone.

The CBN said 72.55 per cent of the N4.65 trillion raised came from domestic investors, with 27.45 per cent from international markets.

That foreign participation was a big deal as international investors, who tend to be sensitive to risk, found Nigerian banking credible enough to commit real capital, a signal the sector’s advocates have been keen to emphasise.

Is your money safe?
This is where many Nigerians have legitimate questions, particularly around the three banks that did not meet the deadline: Union Bank, Keystone Bank, and Polaris Bank.

Speaking on ARISE TV, Olubukola Akinwunmi, the director of banking supervision at the CBN, said the banks remained fully operational and that Nigerians should feel no cause for alarm.

He noted that the delays were tied to ongoing judicial and regulatory processes, not to solvency concerns, and that the CBN was closely monitoring the institutions.

“The Central Bank of Nigeria continues to monitor these banks closely, and once any judicial processes are concluded, they will complete the recapitalisation process,” he said.

Analysts mostly agree, though there are some differences.

Aliyu Illias, an economic analyst, said, “NDIC has not declared any of them weak or bankrupt. Depositors should still have confidence in banking. For now, there’s no stressed bank that will have issues.”

Mr Illias pointed out that the three banks are not necessarily out of options.

Banks that cannot meet their current licence threshold can downgrade—from international to national, or from national to regional—to match a lower capital requirement.

Alternatively, merger discussions could bring their combined capital up to standard. Failure, in other words, is not the only or even the most likely outcome.

Muda Yusuf, economist and the director-general of the Centre for the Promotion of Private Enterprise, added context to the oversight dimension.

He explained that the three banks are currently under a form of special CBN supervision, a transition arrangement that limits their ability to raise fresh capital independently.

“The CBN has given assurance that there is no problem. People can continue to do business with them,” Mr Yusuf said.

The key regulatory principle is that only the CBN or the Nigeria Deposit Insurance Corporation can officially declare a bank distressed. Until either body does so, depositors have no technical basis for panic.

Recapitalisation’s impact on economy
If the recapitalisation works as intended, the effects should be felt well beyond bank boardrooms. Mr Yusuf drew the connection to everyday life.

“The bigger your capital, the bigger the risk that you can take, the bigger the projects that you can finance, and the more resilient you will be to absorb any shock,” he said.

This means banks are now better positioned to fund infrastructure, oil and gas, manufacturing, and technology projects that previously exceeded their risk appetite.

More financing for big projects means more investment. More investment means more jobs. The logic, while not automatic, is straightforward.

But capacity to lend and willingness to lend are not the same thing.

Nigerian banks have historically favoured government securities, drawn by their high yields and lower risk, while private-sector credit has remained relatively modest compared to the size of the economy.

Nigeria’s credit-to-private-sector ratio has historically been far below that of comparable emerging markets.

Recapitalisation alone may not close that gap, but it removes one structural obstacle: banks that previously lacked the capital depth to take on large, long-term financing risks.

The CBN also said the sector’s Capital Adequacy Ratios, the measure that determines how much buffer a bank holds against its lending risk, now exceed global benchmarks.

The international Basel standard sits at eight per cent. Nigerian national and regional banks are required to maintain 10 per cent, while internationally authorised banks must hold 15 per cent.

On that measure, the sector enters this next phase in a stronger position than it has been in years.

Although banks have met the recapitalisation requirements, some key issues remain. One major concern is whether the fresh capital will actually reach the real economy.

Raising funds is only the first step. What matters more is how effectively banks use it, especially in lending to small businesses, supporting manufacturers, and financing infrastructure.

This will determine whether the expected economic benefits are realised.

“However, the true measure of success will lie in the extent to which stronger banks translate their enhanced capital base into improved credit delivery, deeper financial inclusion, and more robust support for the real economy,” Mr Yusuf stated.

He added that the gains from recapitalisation should be supported by policies that encourage lending, lower borrowing costs, and strengthen connections between banks and productive sectors of the economy.