Why Recapitalization Alone Cannot Deliver FCMB’s Turnaround
To lead Nigerian banking in the next decade, the winners will not be the banks with the biggest capital raise this year. They will be the banks that started building the right skills ten years ago. In a sector that now talks only about capital adequacy, tier-1 ratios and quarterly profits, that is an uncomfortable truth. But the logic of strategy has already shifted. Corporate strategy can no longer be a collection of business unit P&Ls held together by fresh equity. It must be centered on core competencies — those bundles of skills, technologies and processes that act as gateways to entire families of future products and markets. Banks that understand this will shape what comes next. Banks that don’t will spend the next decade buying platforms, paying vendors, and depending on the institutions that did the hard, slow work of competence-building years earlier.
FCMB’s new capitalization meets the CBN requirement. It strengthens buffers, restores regulatory comfort, and buys the bank time. That matters. But capital is fuel, and fuel is not an engine. Pouring more fuel into an engine designed for 1990s banking will only make you burn cash faster. You can be fully capitalized and still be strategically peripheral. The global auto firms that had cash but no battery competence, and the U.S. computer makers in the 1990s who had brand and distribution but no display technology, were profitable for a while. Then they began writing checks to the Japanese and Taiwanese firms that had invested in the underlying skills long before the market appeared. The CBN mandate has reset the starting line for every bank. It has not determined who will win the race.
A core competence is not a branch network, a banking license, or even a strong brand. It is an aptitude. Honda’s is engines and power-to-weight engineering. Sony’s is miniaturization. FedEx’s is logistics. Wal-Mart’s is inventory and distribution. In banking, real competencies rarely appear as line items. They show up in how customers experience value. Customers do not choose a bank because of its head office. They choose it because credit arrives in hours, because the app works on salary day, because a relationship manager understands the cashflow of their business. Few can explain the risk models or data pipelines behind that, but they feel the benefit. That is the first test: disproportionate customer value. The second is uniqueness. Every bank now has an app and an agent network. Few have turned alternative data, credit scoring and last-mile distribution into a routing and underwriting competence that competitors cannot easily copy. That difference is what turned agency banking into a structural advantage for some and into an expense line for others. The third test is extendability. This is what makes a competence a gateway rather than a product. 3M’s skill in adhesives did not produce one item. It produced tens of thousands. A true banking competence does the same. A mastery of SME cashflow underwriting can extend into trade finance, asset finance, payroll, insurance and banking-as-a-service. A mastery of diaspora wealth management can extend into remittances, mutual funds, pensions and estate planning. This is why investing in competence leadership is like buying an option on the future. In the late 1980s Sharp and Toshiba spent hundreds of millions on flat-panel displays when the only market was calculators. There was no spreadsheet to justify it. But they understood that whoever controlled portable, low-power, high-resolution screens would own dozens of applications later. By 1992 Sharp held 38% of a $2.1 billion market that was about to triple. U.S. firms focused only on the laptop as an end-product and ended up dependent on suppliers. Nigerian banks face the same choice now. Whoever controls real-time credit decisioning, trust at scale, or embedded finance rails will have access to markets that do not yet exist. Recapitalization alone does not create that.
If competencies are the roots and products are the fruit, then the job of top management changes. It can no longer be to simply manage each business for current returns. Leaders must have a point of view today about which competencies to build for 5 to 10 years out, even when the end-products are not yet clear. They must also know which current competencies are quietly eroding and which competitors are actually “competence competitors” rather than just product competitors. Most banks still fight at the final level: brand and product share in the app store and on the street. By the time that battle begins, much of the advantage has already been decided upstream. The real fight starts with competing for talent, data, and alliance partners to acquire constituent skills. Then comes the harder work of synthesizing those skills into a true competence, which requires integration across retail, corporate, technology and risk more than invention in any single department. Japanese firms often won not because they invented first, but because they were better at combining and absorbing. The third level is competing for “core product” share. Canon sells printer engines to HP and Apple. Its share of the intermediate engine market is far higher than its share of branded printers, and that volume funds the next round of competence-building. In banking the engine is the rails: payments infrastructure, underwriting models, treasury capabilities, wealth platforms. If other banks and fintechs line up to rent your engine, that is proof you lead a competence. If you have to line up to rent theirs, that is proof you do not. FCMB’s recapitalization helps it survive at the final level. It does not guarantee leadership at the first three.
This is difficult because competence-building violates almost every pressure inside a modern bank. It takes years, not quarters. JVC spent almost 20 years perfecting videotape. Philips did the same for optical media. You cannot accelerate cumulative learning the way you can accelerate a product launch. It is also invisible in the short term. Profits can hide weakness. Intel’s $2.3 billion profit in 1993 looked like competence, but much of it came from legal protection of the X86 architecture and the installed base that IBM had created. Strip those away and you saw the underlying skill gap. Porsche learned this painfully. Its brand allowed it to charge a premium for years while Japanese competitors quietly overtook its engineering. By the early 1990s buyers realized the performance no longer matched the price, and U.S. sales fell from over 30,000 to under 4,000 in less than a decade. Banks face the same risk. A recapitalized institution can still run 1990s credit processes, keep customer data in silos, and have no extendable digital capability. It will look healthy until a competitor with a real competence offers instant SME lending and the market shifts underneath.
The move toward virtual integration makes this even more treacherous. You do not need to own everything. Nike outsources manufacturing but controls design, logistics and brand. Canon buys 75% of the parts in its copiers. The danger is in outsourcing what is truly core. When you do that, you surrender control of your future. Rover became dependent on Honda for engines and platforms. U.S. computer makers became dependent on Japanese and Taiwanese firms for screens and components. In Nigerian banking this is already visible. If FCMB’s stated strength is customer acquisition but its payments, lending engine and data analytics are all rented from vendors and big-tech partners, then recapitalization simply makes it a better-funded distributor. It will pay royalties forever to the firms that built the competence.
Finally, competencies are not permanent. What was once a differentiator becomes baseline. Quality and speed gave Japanese automakers an edge in the 1980s. By the 1990s they were prerequisites for everyone. For banks, mobile apps and USSD are now baseline. Capital adequacy will be baseline after 2026. The next differentiators will be real-time risk, embedded finance, wealth-tech and AI-driven advisory. This means leadership is a continuous process of asking what benefits customers will value next, and what skills will be required to deliver them uniquely.
The choice for FCMB is therefore stark. Banks that center strategy on core competence invest before the business case is obvious. They integrate disparate technologies into new capabilities. They measure progress not just by market share but by competence share. They compete to shape the future. Banks that don’t will remain large and profitable for a time, but they will increasingly find themselves writing checks to the firms that did the hard work earlier — paying for platforms, paying royalties, and depending on others for access to the markets that matter most. Recapitalization gives FCMB the fuel to stay in the race. It does not give it the engine to lead it. To achieve the turnaround and reinvention it seeks, FCMB must answer three questions that capital cannot answer. What is our one extendable competence? What are we willing to build for ten years even if the return is unclear in year two? And what will we refuse to outsource because it defines us to customers? In the next decade the winners in Nigerian financial services will not be the best-capitalized banks. They will be the banks that spent the last ten years building competencies that others now have to buy. That is how you do not just participate in the future of banking. That is how you preempt it.
