The Central Bank of Nigeria’s banking recapitalisation exercise, launched in March 2024, serves as a litmus test for an industry long celebrated for trillion-naira profits yet notorious for starving the real economy of credit.
With just four months left until the March 31, 2026, deadline, CBN Governor Olayemi Cardoso disclosed that 27 banks have tapped the capital market via public offers and rights issues.
Additionally, only 16 have fully met or exceeded the new minimum capital thresholds of N500 billion for internationally authorised banks, N200 billion for national banks, N50 billion for regional banks, and N10-20 billion for non-interest banks.
This means just 44.4 per cent of the 34 licensed commercial banks have met the recapitalisation requirements, signalling a potential wave of mergers.
This scenario closely mirrors the consolidation era of 2005, when then-Governor Chukwuma Soludo raised the minimum capital requirement from N2 billion to N25 billion, reducing the number of banks from 89 to 25 through mergers and acquisitions.
That exercise resulted in stronger balance sheets, operational synergies, and restored public confidence by curbing distress and malpractices.
However, it failed to address the superficial connection between banks and the real economy, which fostered boom-bust cycles culminating in the 2009 crisis.
Cardoso’s current efforts aim to achieve similar structural improvements, specifically fortifying banks against external shocks, redesigning credit-risk frameworks for governance and transparency, ending cyclical instability, and dramatically boosting MSME lending.
Among banks that have met the new capital thresholds are Access Bank, Zenith Bank, GTBank, Wema Bank, Jaiz Bank, Stanbic IBTC, Premium Trust Bank, Providus Bank, Lotus Bank, and Greenwich Merchant Bank.
First Bank, Union Bank, and UBA–members of the “too big to fail” FUGAZ group–are expected to comply eventually.
The question remains: how have banks, whose five largest members recorded a combined pre-tax profit of N4.6 trillion in 2024, a 70 per cent jump year-on-year, with Zenith and GTCO breaching N1 trillion each, suddenly scrambled for fresh equity infusions just months later?
The answer lies in the post-pandemic reset, as the CBN phases out COVID-era regulatory forbearance that masked rising non-performing loans.
Eight top banks booked N1.96 trillion in impairments in the first nine months of 2025, a 49 per cent increase from the previous year amid sluggish loan growth of 7.42 per cent to N65.37 trillion, contrasting sharply with expansive balance sheets.
This vulnerability highlights a deep divide between the banking sector and the real economy.
The N1.9 trillion impairment gap reflects lopsided lending concentrated in risky corporates, political elites, and oil and gas giants, while SMEs, which drive 48 per cent of GDP and 84 per cent of employment, face severe credit scarcity.
Banks’ reliance on easy profits has entrenched bad practices: imposing dubious charges on customers, refusing to finance genuine economic drivers, and harbouring toxic exposures.
Furthermore, banks hoard N20.4 trillion in Federal Government bonds and treasury bills, enticed by risk-free returns amid soaring rates.
Fee income surpassed financial intermediation last year, with N1.2 trillion earned from commissions on transfers, ATMs, and alerts, despite CBN fines, draining billions across 312 million accounts through opaque, often dubious levies that leave customers frustrated.
Meanwhile, bankers have drawn criticism for lavish lifestyles, private jets, mansions in Europe’s prime areas, extravagant parties, and costly acquisitions, while shareholders only see paltry dividends.
Femi Otedola, First Bank’s chairman, decried such excesses, pointing out that Nigerian banks spend an estimated $50 million annually on private jet maintenance, with four banks collectively spending over $500 million to acquire nine private jets, undermining public trust and diverting funds from vital areas.
Fintech firms have capitalised on this gap. As of early 2025, operators surged 70 per cent to 430, with fintech processing N3.1 quadrillion ($2.03 trillion) in e-payment transaction volumes in 2024 alone, up 39 per cent over 2023 per Agusto & Co.
Beyond regulatory measures, this recapitalisation must fundamentally reset Nigeria’s banking sector. Massive institutions serve little purpose in a stunted economy.
UBA’s Managing Director, Oliver Alabuwa, recently emphasised that to enhance productivity, exports, MSMEs, and technological growth, banks must bravely lend to youth entrepreneurs, women, and creatives, a segment worth $15 billion, approaching credit as economic trust rather than lifestyle largesse.
Moving forward, the CBN should mandate productive lending quotas and reward proactive governance, while the government must address underlying constraints such as security, power, and infrastructure.
Nigerian banks must transform from profit illusions to engines of development, driving the country towards its $1 trillion GDP vision by 2030.
