Following the significant depreciation of the naira, which caused Nigerian banks to fall behind in the hierarchy in Africa, the Central Bank of Nigeria aims to further strengthen the financial system by instructing local lenders and Bureaux De Change to bolster their capital reserves, writes FELIX OLOYEDE

Global credit rating agency, Fitch Ratings, has confirmed that Nigerian banks are making notable strides in meeting the Central Bank of Nigeria’s new capital requirements — a move that is helping to rebuild capital buffers weakened by naira devaluation and laying the groundwork for renewed business expansion.

The Tier 1 capital of Nigeria’s banks dipped by 23.5 per cent on the back of the decline in the value of the naira against the US dollar, according to Africa’s Top 100 Banks 2024.

To reduce the economic and financial sector impact of local currency depreciation, in March 2024, the CBN mandated local banks to recapitalise by the first quarter of 2026.

The recapitalisation plan mandates minimum capital requirements as follows: commercial Banks with International licenses: N500bn; commercial banks with national licenses: N200bn; and commercial banks with regional licenses: N50bn.

The requirements for other types of banks are as follows: merchant banks: N50bn; non-interest banks with national licenses: N20bn; non-interest banks with regional licenses: N10bn.

Shortly after announcing the recapitalisation of the banking sector, the central bank directed Bureaux De Change to increase their capital base to N2bn for Tier-1 categories (those seeking a license to operate nationwide) and N500m for Tier-2. Initially, they were required to meet this new capital requirement by November 2024. However, the regulator later extended the deadline to June 3, 2025, and then further to December 31, 2025.

High regulatory standards are essential for protecting Nigeria’s financial ecosystem and ensuring its compliance with global best practices.

For the CBN, achieving sustainable economic growth requires strong support from the financial system. The financial sector regulator is, therefore, eager to align monetary and fiscal policies to realise the government’s vision of growth for businesses and a $1tn economy size for the country.

According to the central bank, it is committed to ensuring transparency, stability, and compliance in the foreign exchange market and will continue to engage with all relevant stakeholders in line with its statutory mandate.

CBN Governor Olayemi Cardoso explained that bank recapitalisation helps ensure lenders are adequately capitalised, empowering them to take on greater risks—especially in underserved markets.

With stronger capital bases, banks can offer more loans and financial products to micro, small, and medium enterprises, rural communities, and other vulnerable groups that have previously struggled to access formal financial services.

Cardoso said the recapitalisation policy not only strengthened financial stability but also catalysed inclusive growth.

“By enabling banks to extend more credit to MSMEs, we enhance job creation and productivity. Furthermore, with increased capital, banks can invest in technology and innovation, crucial for driving digital financial services such as mobile money and agent banking. These technologies are key to breaking down geographic and economic barriers, bringing financial services to even the most remote areas,” he stated.

He stated that Nigeria has the capacity to enhance financial inclusion and foster the growth of businesses and the economy. He added that the recapitalisation exercise will also bolster the government’s efforts to reach a $1tn economy.

The CBN emphasised that banking recapitalisation is crucial for achieving the government’s $1tn economy agenda.

The President of the Association of Bueaux De Change Operators of Nigeria, Dr Aminu Gwadabe, asserted that BDCs would continue to remain the third level of the forex market and ensure the closing of the gap between the official and parallel market rate.

ABCON had previously called on the CBN to review the minimum capital base for tier-1 operators to N500m and for tier-2 operators to N100m, but the suggestion was declined.

Cardoso explained that the banking sector remains robust, with key indicators reflecting a resilient system.

“The non-performing loan ratio remains within the prudential benchmark of five per cent, showcasing strong credit risk management. The banking sector liquidity ratio comfortably exceeds the regulatory floor of 30 per cent, a level which ensures banks are maintaining adequate cash flow to meet the needs of customers and their operations. The recent stress test conducted also reaffirmed the continued strength of our banking system.

“I am pleased to note that a significant number of banks have raised the required capital through rights issues and public offerings well ahead of the 2026 deadline! I believe that the banking sector is in a strong position to support Nigeria’s economic recovery by enabling access to credit for MSMEs and supporting investment in critical sectors of our economy,” he explained.

The Group Managing Director of United Bank for Africa, Mr Oliver Alawuba, stated that the CBN’s ongoing bank recapitalisation policy was timely and crucial for preparing the financial system to support a growing, globally competitive economy.

According to Alawuba, the initiative aims to enhance the resilience of the banking sector by strengthening its capacity to withstand economic shocks, including inflation, currency volatility, and global geopolitical disruptions.

He enthused that the policy would also position Nigerian banks to better support the country’s long-term economic transformation, which includes financing large-scale infrastructure and industrial projects.

Alawuba emphasised that the recapitalisation policy transcends mere regulatory compliance, describing it as a forward-looking strategy designed to position Nigerian banks for the scale and sophistication demanded by a trillion-dollar economy.

He noted that the initiative would strengthen the sector’s capacity to support both traditional economic pillars—such as oil and gas, agriculture, and manufacturing—and emerging industries like fintech, green energy, and infrastructure development.

“Nigerian banks need adequate capital buffers to meet the evolving demands of these sectors. Without this, the industry cannot effectively rise to the challenge,” he said.

The banker stressed the stark difference between Nigerian banks and those in more advanced economies, where bank assets usually range from 70 to 150 per cent of gross domestic product.

In 2024, Nigeria’s bank assets made up just 11.97 per cent of GDP—a gap that must be closed to align with global standards.

He praised the CBN’s directive to raise minimum capital thresholds, calling it a timely move to strengthen financial institutions and support national goals like infrastructure, digital innovation, financial inclusion, and economic diversification.

Alawuba mentioned that a strong, well-capitalised banking sector is vital to Nigeria’s goal of becoming a $1tn economy, and the recapitalisation push is a step toward that vision.

By promoting a strong compliance culture and tightening risk management frameworks, the CBN aims to safeguard Nigeria’s financial sector while enhancing its resilience and credibility both locally and globally.

To this end, the apex bank has reiterated its commitment to a transparent and robust financial system by reinforcing regulatory standards across institutions.

As part of this drive, the CBN recently partnered with Citi to host a high-level Mandatory Compliance and Anti-Money Laundering Workshop in Lagos.

Speaking at the event, the CBN Governor’s Special Adviser on Compliance, Ms Shola Phillips, underscored the importance of adhering to global banking standards to maintain confidence in the sector.

“Regulators expect financial institutions to maintain dynamic, risk-based AML/CFT programmes that are responsive to the evolving financial environment. Proactive engagement with regulatory developments and the integration of innovative compliance solutions are essential for institutions to meet these expectations effectively,” Phillips noted.

The training brought together compliance officers, trade operations experts, and correspondent banking teams from across Nigeria’s financial sector, offering vital insights into global regulatory shifts, emerging financial risks, and strategies to sustain correspondent banking ties.

The Managing Director of Citi’s Correspondent Banking Group, Siobhan Ni Ealaithe, stressed the importance of strong governance frameworks in risk mitigation, emphasising the critical role of Know Your Customer, Know Your Business, and Know Your Transaction protocols in combating financial crime.

Delivering a sobering perspective, Stephanie Bailey, Head of EMEA AML Risk Management for Foreign Correspondent Banking, revealed that over $3tn in illicit funds circulate through the global financial system each year.

She called on financial institutions to step up due diligence, adopt technology-driven risk assessment tools, and ensure full transparency in all transactions.

Speaking recently to bankers, Cardoso said the ethics and professionalism of bankers and treasurers are under constant scrutiny.

He stated that the apex bank introduced the FX Global Code for all authorised dealers and market participants to ensure complete compliance with regulations. He encouraged the Chartered Institute of Bankers of Nigeria to take the initiative in upholding and demonstrating the highest standards in the industry.

“At the Central Bank, we have intensified surveillance of market activities to ensure compliance and eliminate bad actors who attempt to undermine the system. Together, we must build a market based on strong governance and transparency. As regulators, we will maintain a zero-tolerance approach to compliance violations,” he said.

Cardoso explained that within the banking sector, the sector remains robust, with key indicators reflecting a resilient system.

“The non-performing loan ratio remains within the prudential benchmark of five per cent, showcasing strong credit risk management. The banking sector liquidity ratio comfortably exceeds the regulatory floor of 30 per cent, a level which ensures banks are maintaining adequate cash flow to meet the needs of customers and their operations. The recent stress test conducted also reaffirmed the continued strength of our banking system,” he said.

To enhance the banking system’s ability to support economic growth, initiatives to bolster banks’ capital buffers were announced in 2023, with a two-year implementation period.

“I am pleased to note that a significant number of banks have raised the required capital through rights issues and public offerings well ahead of the 2026 deadline! I believe that the banking sector is in a strong position to support Nigeria’s economic recovery by enabling access to credit for MSMEs and supporting investment in critical sectors of our economy,” he said.

In a similar context, Other Financial Institutions have significant potential to boost productivity and drive economic growth by providing access to credit and financial services for underserved individuals and businesses.

To unlock this potential, the Central Bank of Nigeria aims to strengthen key institutions, particularly primary mortgage banks and microfinance banks, to improve their efficiency and impact.

“Our strategy includes implementing model mortgage foreclosure laws to stimulate lending and reduce delinquency, integrating PMBs and MFBs into the GSI platform to minimise non-performing loans, and leveraging Development Finance Institutions more effectively to provide increased lending facilities to well-managed OFIs,” he said.

Cardoso highlighted that Nigeria’s payments ecosystem is more advanced than that of many developed countries, yet it has not always received the recognition it deserves.

He pointed out that several innovations that other nations are just beginning to implement have already been integrated into our system for years.

As Nigeria charts its course toward a $1tn economy, the CBN’s recapitalisation agenda stands as both a safeguard and a catalyst—a bold reset designed to rebuild trust, deepen financial inclusion, and future-proof the banking sector.

With rising capital buffers, tighter compliance regimes, and renewed commitment to global standards, the stage is set for Nigerian banks to reclaim their standing on the continent and power the nation’s economic transformation from the ground up.

Whether the system rises to meet this moment will depend not just on policy, but on the will of institutions to evolve, innovate, and lead.