World Bank Endorses Nigeria’s Bank Recapitalisation to Boost Private Sector Growth

The World Bank has applauded the Central Bank of Nigeria’s (CBN) ongoing banking sector recapitalisation, calling it a crucial step to strengthen financial system stability and position banks to fuel private sector growth. The endorsement was given by Mr. Matthew Verghis, the World Bank’s country representative for Nigeria, during Agusto & Co.’s 2026 Economic Roundtable, where policymakers, bankers, and development experts discussed the implications of the move for the wider economy.

Verghis explained that the recapitalisation was long overdue, as years of economic challenges had eroded banks’ capital buffers. “The basic reason why this recapitalisation was needed is that over the decade, banks had become undercapitalised due to high inflation and exchange rate pressures. Raising capital adequacy is essential for the stability of the economy,” he said, emphasizing the importance of adequately financed banks.

As of December, about 25 of Nigeria’s 38 commercial and merchant banks had met the new capital requirements, mobilising roughly N2.5 trillion, while the remaining institutions have fewer than 50 days to comply. Verghis noted that the recapitalisation aligns with broader federal reforms, including foreign exchange harmonisation, subsidy removal, and revenue reforms designed to restore macroeconomic stability.

Despite these efforts, the World Bank chief highlighted that domestic credit to the private sector remains weak, with Nigeria’s ratio at 21 percent compared to a Sub-Saharan average of 33 percent and 50 percent in countries like the Philippines. He stressed that for the reforms to yield real benefits, inflation must fall sharply and economic growth must accelerate, encouraging banks to redirect liquidity from government securities to productive private-sector investments.

Verghis also underscored the critical role of micro, small, and medium enterprises (MSMEs), which make up 97 percent of Nigerian businesses. While these businesses face structural challenges like informality and limited access to finance, he expressed optimism that the recapitalisation, coupled with easing interest rates, would increase credit availability and promote inclusive growth across the economy.

source: leadership