Nigeria’s ambition to reach a $1 trillion GDP by 2030 heavily relies on the banking sector’s ability to increase capital and support economic growth. At a recent seminar for finance professionals in Abuja, the Central Bank of Nigeria (CBN) emphasized the crucial role of bank recapitalisation in achieving this target. According to Olubukola Akinniyi Akinwunmi, the director of the CBN’s Banking Supervision Department, a strong financial system capable of absorbing shocks is necessary for the country’s economic stability. To this end, the CBN introduced higher capital requirements for commercial, merchant, and non-interest banks in 2024, aiming to bolster the financial system by 2026.
As part of the recapitalisation process, banks have three options: equity injections, mergers and acquisitions, or downgrading their license types. Fitch Ratings reports that Nigerian banks are on track to meet the new capital requirements and are expected to see an inflow of approximately N4 trillion by the end of the recapitalisation period. The ratings agency also highlights that these efforts are strengthening the banks’ capitalisation, offering a buffer against potential external challenges like currency devaluation.
The CBN also observed positive investor sentiment following the stabilization of Nigeria’s foreign exchange (FX) rate. Akinwunmi pointed out that these developments were vital for attracting foreign direct investment (FDI) and fostering economic growth. He stressed that Nigeria’s banking sector must be able to withstand global shocks, such as trade disruptions, to support domestic industries and maintain investor confidence. This stability, coupled with recapitalisation, enables banks to take more risks while financing critical sectors of the economy.
Emem Usoro, the CBN deputy governor for corporate services, reinforced the importance of recapitalisation, urging the banking sector to become resilient enough to drive economic development and compete internationally. She emphasized that strong, well-capitalised banks are necessary for effective financial intermediation and funding large-scale development projects, making the recapitalisation efforts central to Nigeria’s long-term growth strategy.
Source: Business day