CBN Warns Bank Recapitalisation Could Heighten Market Concentration in Nigeria
The Central Bank of Nigeria (CBN) has raised concerns that the ongoing bank recapitalisation program may inadvertently increase concentration risk in the nation’s capital market, potentially sidelining non-bank issuers. The warning comes even as equities show a bullish momentum, highlighting the complex trade-off between strengthening banks and maintaining a diversified market.
According to the CBN’s Macroeconomic Outlook for Nigeria, 2026: Consolidating Macroeconomic Stability Amid Global Uncertainty, the recapitalisation effort is essential for reinforcing banks’ balance sheets and resilience. However, the apex bank noted that increased focus on the banking sector could draw investor attention away from corporates in other industries, potentially leading to market crowding and reduced funding opportunities for non-bank issuers.
The report also highlighted broader financial system vulnerabilities. While improvements in capital adequacy and liquidity ratios offer some protection, the CBN warned that adverse macroeconomic developments—such as rising credit losses or foreign exchange shortages—could strain banks’ reserves, threaten prudential limits, and disrupt financial intermediation. Rising non-performing loans were flagged as a medium-to-high risk, with asset quality deterioration potentially undermining earnings and amplifying systemic exposure.
Beyond financial risks, the CBN spotlighted exchange rate volatility, cybersecurity threats, and fiscal vulnerabilities. A sharp naira depreciation could affect banks’ liquidity and expand monetary aggregates, while cyberattacks on interconnected financial institutions might compromise data and public confidence. On the fiscal side, Nigeria’s reliance on oil revenue—projected at over 57% of government income—combined with weak tax compliance, could hinder revenue performance and challenge macroeconomic stability.
The apex bank concluded that sustaining Nigeria’s economic stability will require coordinated policy action. This includes managing financial sector risks, strengthening public finance management, and promoting a balanced capital market that goes beyond banking, ensuring investors have diversified options and a resilient ecosystem for long-term growth.
source: Punch