Nigeria’s macro headwinds trigger bank recapitalisation
Amid uncertainty, new muscles for new possibilities
The CBN has released new guidelines on the minimum capital requirement for banks operating in Nigeria. This ranges from NGN50bn to NGN500bn depending on the type of licence held by the bank. In total, approximately NGN4.14trn is expected to be raised between now and March 31, 2026.
The upward review of the capital base is an essential action required to boost capital adequacy needs of the Nigerian financial industry, which has been significantly impacted by macroeconomic challenges such as high inflation and interest rates, currency volatility and forex illiquidity.
The upward revision will ensure that Nigerian banks have the capacity to take on bigger risks and stay afloat amid both domestic and external shocks. It also means increased liquidity position of banks, which will help broaden their loss-bearing capabilities. With the proposed recapitalisation exercise, the prospect of a reduction in the number of banks is high. However, this reduction will create room for an even stronger banking sector that can drive a USD1trn economy by 2030.
The proposed recapitalisation will impact the financial industry and economy as a whole. Some of these implications include but are not limited to
- Increased market liquidity and deeper capital markets
- Inflow of foreign investments
- Economies of scale, cost savings and improved efficiency within the banking sector
- Increased tax revenue for the government in the long run due to
- economies of scale
- Dilution of voting power and changes in company valuation
“Banks are to the economy what the heart is to the human body.
They cycle necessary capital through the whole, and are barely noticed until
pressure, necessity, or crises”- Hendrith Vanlon Smith Jr.
