McKinsey and Company has said that the fresh funds being raised by Nigerian banks would likely go towards improving their technology, digital lending and expansion into non-banking operations.

This was disclosed by the partner and Financial Services Lead, Africa, Mayowa Kuyoro, at the maiden Media Day of McKinsey & Company in Lagos on Tuesday.

Nigerian banks have been mandated to raise additional capital to meet the new thresholds set by the Central Bank of Nigeria. The March 2024 directive mandated Nigerian banks to increase their minimum share capital by April 1, 2026, to enhance resilience against shocks, support economic growth, and achieve the goal of a $1tn economy.

Under this mandate, commercial banks with an international licence will need N500bn, while those with a national licence require N200bn to maintain their standing. Merchant banks have to raise N50bn. Non-interest banks with a national licence will be required to raise N20bn, while their regional counterparts will need N10bn to continue their operations.

According to the McKinsey partner, banks that successfully raise funds will likely channel them into four key areas.

Kuyoro said, “Seamless customer experience has become non-negotiable. Banks that channel recapitalisation funds into technology will be the ones that stay ahead of the curve.

“With fresh capital, we expect banks to lend more aggressively in the consumer space, provided they build the right risk models to manage exposure.”

On investing in their non-banking subsidiaries, Kuyoro said, “Some banks under holding company structures will use the new funds to strengthen their non-bank subsidiaries, especially in areas like asset management and insurance. Recapitalisation gives Nigerian banks the balance sheet strength to look beyond their borders. International expansion, both within Africa and beyond, is firmly on the agenda. For those that can’t raise capital, their survival will depend on mergers.

 We’re already seeing early signs of this trend, and it will accelerate.”

With about six months to the expiration of the deadline to the exit, some banks have successfully raised the required capital, while others are currently on the second leg of their capital-raising exercise.