CBN Ends Capital Restoration Deadline, Banks to Adopt Stricter Lending as Recapitalisation Deepens

As the Central Bank of Nigeria’s (CBN) deadline for the Capital Restoration Plan expires today, banks are bracing for a shift toward more conservative lending practices. Financial analysts predict that while these measures may cause short-term credit tightening, they are ultimately aimed at stabilising and strengthening Nigeria’s financial system. The restoration plan marks the end of COVID-era regulatory forbearance, returning banks to stricter compliance and capital adequacy standards.

In its latest directive, the CBN requires affected banks to submit detailed Capital Restoration Plans, including strategies such as cost optimisation, reduction of risk assets, and business model adjustments. These plans must outline how banks will restore compliance with regulatory capital and asset quality requirements. The policy also mandates quarterly disclosures on provisioning, restructured loans, and tier-1 capital instruments to enhance transparency.

The apex bank has temporarily lifted caps on the recognition of Additional Tier-1 (AT1) capital from June 30, 2025, to March 31, 2026, allowing banks to boost their capital buffers during the transition. However, the CBN clarified that this is not a replacement for the broader recapitalisation drive but a support measure to ensure compliance during the reform process.

Market analysts, including those at Meristem, believe that the regulatory changes will prompt banks to tighten credit policies and focus on efficiency, potentially slowing lending in the short term. However, they anticipate this will improve investor confidence, increase market stability, and lead to a revaluation of Nigerian financial stocks in the long run.

Financial expert Tilewa Adebajo of CFG Advisory explained that the recapitalisation process is a standard and necessary evolution in banking. He noted that during the pandemic, banks operated under relaxed rules, but the CBN is now restoring stricter standards. With various banks already initiating capital raises, the sector is moving toward healthier practices. Adebajo emphasized that the process should not cause panic, as it is intended to fortify the Nigerian banking system.