Banks’ Recapitalisation Crucial to Nigeria’s $1tn Economic Goal — CBN

The Central Bank of Nigeria (CBN) has reaffirmed that the ongoing banking sector recapitalisation is vital to achieving President Bola Tinubu’s ambitious goal of transforming Nigeria into a $1 trillion economy by 2030. The apex bank noted that strengthening the capital base of financial institutions is essential to enhancing credit growth, boosting resilience against shocks, and supporting sustainable economic expansion.

CBN Governor, Olayemi Cardoso, stated this while addressing financial sector stakeholders in Abuja, explaining that the recapitalisation exercise is not merely a regulatory requirement but a strategic move to align the banking industry with Nigeria’s broader developmental vision.

Cardoso said the recapitalisation policy would ensure that Nigerian banks possess the capacity to finance large-scale projects in critical sectors such as infrastructure, energy, manufacturing, and agriculture, which are central to achieving long-term economic transformation.

“The recapitalisation of banks is not punitive. It is designed to make our financial system stronger, more stable, and capable of supporting the real sector in driving inclusive growth. To attain a $1 trillion economy, we must have banks that can effectively fund industrialisation, innovation, and trade at a scale that matches the nation’s aspirations,” he said.

The CBN had in April 2024 directed commercial banks to raise their minimum capital base significantly — N500 billion for international banks, N200 billion for national banks, and N50 billion for regional banks — with a two-year compliance timeline. The directive marked the first major recapitalisation since 2005 when the then-CBN Governor, Charles Soludo, raised the minimum capital base to N25 billion.

Since the announcement, several banks have embarked on various capital-raising measures, including rights issues, private placements, mergers, and strategic partnerships to meet the new requirement. The exercise, according to Cardoso, is expected to consolidate the industry and enhance investor confidence in Nigeria’s financial system.

Speaking on the sidelines of the event, the CBN Governor stressed that the recapitalisation drive will play a key role in ensuring macroeconomic stability and increasing the capacity of banks to finance the private sector. “We envision a banking system that can withstand global headwinds and support Nigeria’s economic diversification efforts. Stronger banks mean greater access to credit for small businesses and industries that power job creation,” he said.

Cardoso also noted that the recapitalisation exercise will complement ongoing reforms in the foreign exchange market, fiscal consolidation efforts, and structural adjustments aimed at stabilising the economy. “Our goal is to build a sound and resilient financial sector that can sustain growth, support innovation, and promote financial inclusion,” he added.

The CBN’s vision, analysts say, aligns with global best practices, as countries targeting large-scale economic growth often rely on robust banking systems capable of mobilising long-term capital. Nigeria’s current banking sector, while profitable, has faced challenges including limited foreign currency liquidity, rising non-performing loans, and exposure to exchange rate volatility.

An economist at the University of Lagos, Dr. Chika Okonkwo, described the recapitalisation as timely and necessary. “For Nigeria to achieve a trillion-dollar GDP, banks must have enough capital buffers to support industrial lending. The recapitalisation is a corrective measure to ensure financial stability and enhance the sector’s ability to fund long-term projects,” she said.

Okonkwo added that a stronger banking sector would also attract foreign direct investment (FDI) and restore investor confidence in Nigeria’s financial markets. “Foreign investors often evaluate the strength of a country’s financial system before making large commitments. Recapitalisation sends a strong signal of resilience and preparedness,” she stated.

Similarly, Managing Director of Financial Derivatives Company, Bismarck Rewane, argued that the policy will reposition the sector for competitiveness in a rapidly evolving global market. “If Nigeria’s economy must grow at an average of 6–7% annually to reach the $1 trillion target, its banking system must be well-capitalised to fund that expansion,” Rewane said.

He further explained that with rising inflation and exchange rate depreciation, banks’ real capital values have eroded over time, making recapitalisation unavoidable. “A N25 billion capital base in 2005 is not equivalent to the same amount in today’s economy. Adjusting for inflation and currency depreciation, we can see that banks need more muscle to remain competitive,” he said.

The recapitalisation initiative is also expected to facilitate greater financial inclusion by enabling banks to expand their reach across underserved communities. According to the CBN, this will complement the government’s efforts to digitise the economy and expand access to affordable credit for individuals and micro, small, and medium enterprises (MSMEs).

Furthermore, Cardoso assured Nigerians that the CBN will maintain a stable and transparent supervisory framework to ensure a smooth recapitalisation process. He reiterated that the exercise would not lead to a banking crisis but would instead produce a stronger and more competitive financial sector.

“We have learned from past experiences and are implementing the recapitalisation exercise with great caution and oversight. Our priority is to protect depositors, preserve stability, and strengthen confidence in the financial system,” he said.

Stakeholders in the banking industry have expressed support for the CBN’s move. The Chartered Institute of Bankers of Nigeria (CIBN) commended the policy, saying it would help the country build financial institutions that are globally competitive. CIBN President, Dr. Ken Opara, said, “Recapitalisation is necessary to ensure Nigerian banks can finance major infrastructure and industrial projects without excessive dependence on external borrowing.”

The Bank Directors Association of Nigeria (BDAN) also urged the CBN to provide flexible regulatory guidelines and foster an enabling environment that encourages mergers and acquisitions, especially for smaller banks that may struggle to meet the new thresholds.

As banks intensify their capital-raising drives, the Nigerian Exchange (NGX) has witnessed increased activity from financial institutions offering rights issues and private placements. Industry observers expect that this will deepen the capital market and boost liquidity in the months ahead.

Financial experts, however, caution that recapitalisation alone will not guarantee economic growth unless accompanied by broader reforms in fiscal policy, infrastructure development, and governance. “Strong banks must be matched by a productive real sector and stable macroeconomic environment,” said Dr. Ayo Teriba, CEO of Economic Associates.

Nevertheless, the consensus among analysts is that the CBN’s recapitalisation policy is a strategic step toward building a robust financial system capable of driving Nigeria’s $1 trillion economic ambition.