Beyond the Balance Sheet: Nigeria’s Bank Recapitalisation Spurs Debate on Profit vs Purpose
With only months left before the Central Bank of Nigeria’s (CBN) recapitalisation deadline, banks in Nigeria are rushing to meet steep capital requirements amid economic instability. The CBN mandate demands N500 billion for international banks, N200 billion for national banks, and N50 billion for regional banks. While top-tier institutions have largely achieved these targets, smaller lenders are still undergoing mergers and capital raises. Despite over N13 trillion in new capital raised, analysts caution that recapitalisation must go beyond numbers and truly support economic transformation.
Critics argue that many banks have strayed from their traditional role of fueling economic growth and have instead prioritized profits and shareholder value. With mounting pressure from inflation, foreign exchange instability, and disruptive fintech competition, some banks are focusing more on short-term returns than real-sector lending. At a recent financial summit hosted by Proshare, experts emphasized the need to rethink banking’s purpose in Nigeria, stressing that sustainable growth will only come if banks align more closely with national development goals.
President Tinubu’s upcoming consumer credit initiative, targeting 400,000 young Nigerians, highlights the critical need for banks to embrace innovation and lending risk. Experts like Biodun Adedipe believe recapitalisation presents a chance to reset banking’s focus toward the real economy. He noted that stronger capital should empower banks to lend more, but warned that capital often gets trapped in low-risk investments like government securities rather than supporting productive sectors like agriculture, manufacturing, and SMEs.
Regulatory readiness is another concern. As banks grow through HoldCo structures and digital subsidiaries, the CBN’s oversight faces new challenges. Dr. Omolara Akanji noted that regulators must adapt quickly, as a significant portion of banks’ income now comes from non-core areas like investments and fintech services. Without modern regulatory frameworks and skilled examiners, these complex income sources could reduce transparency and undermine risk control.
Finally, the fintech boom presents both a threat and an opportunity. With fintechs processing nearly 40% of Nigeria’s transactions, traditional banks must adapt or collaborate. Experts caution against the misuse of fintech subsidiaries as regulatory loopholes and stress the need for better oversight to prevent shadow banking. In conclusion, while recapitalisation is critical, stakeholders warn it must go hand-in-hand with reforms that connect banking more deeply with Nigeria’s real economy. Otherwise, the effort may merely enlarge banks without enhancing their developmental impact.
Source: The sun