Recapitalisation: How CBN’s stricter credit-risk policy will protect N4.65trn raised funds

The Central Bank of Nigeria (CBN) is redesigning banking sector’s credit‑risk framework to protect N4.65 trillion new capital raised by 33 banks in the recently concluded bank recapitalisation programme. The CBN is also expected to in the months ahead, be enforcing stronger governance, greater transparency, and firmer accountability to protect raised funds. For many stakeholders, without proper risk management policies and regulatory controls, chances of misapplying such raised funds through risky loans remain high. Regulatory reports indicate that Nigeria’s banking system remains fundamentally sound and resilient, with greater capability to handle big ticket transactions.

With the recapitalisation of banks now over, the next phase of ensuring a strong and virile financial system is protection of raised funds.

That protection comes from sound credit policy and adherence to regulatory standards on risk management.

That explains why the Central Bank of Nigeria (CBN) says it is redesigning the credit‑risk framework to enforce stronger governance, greater transparency, and firmer accountability across the financial sector.

This will enable the regulator to break the boom‑and‑bust cycle that has accompanied past recapitalisation efforts. Previous records, especially during the 2005 recapitalisation, showed that banks tended to lend more, and took little cognizance of proper risk management procedures meant to protect capital.

Speaking during a forum in Lagos, CBN Governor, Olayemi Cardoso, said the apex bank will be enforcing stronger governance, greater transparency, and firmer accountability to protect new capital raised by banks.

How the funds were raised

At the end of the two-year recapitalisation project, the CBN confirmed that 33 banks raised combined N4.65 trillion.

In a statement, jointly signed by CBN Director, Banking Supervision Department, Olubukola A. Akinwunmi, and Acting Director, Corporate Communications Department, Mrs. Hakama Sidi Ali, described the exercise as successful, adding that 33 banks met the revised minimum capital requirements established under the programme.

They said: “Over the 24-month period, Nigerian banks raised a total of N4.65 trillion in new capital, strengthening the resilience of the financial system and enhancing its capacity to support the economy. The programme recorded strong participation from both domestic and international investors, with 72.55 per cent of capital sourced locally and 27.45 per cent from international markets, reflecting sustained confidence in the Nigerian banking sector”.

Governor Olayemi Cardoso commented: “The recapitalisation programme has strengthened the capital base of Nigerian banks, reinforcing the resilience of the financial system and ensuring it is well-positioned to support economic growth and withstand domestic and external shocks.”

Continuing, Cardoso said Nigeria’s banking system remains fundamentally sound and resilient, a cornerstone of our financial stability.

“At the same time, we remain vigilant to emerging risks, including cyber threats, credit-concentration pressures, and operational vulnerabilities. These are being addressed through strengthened risk-based supervision and our ongoing transition to Basel III, which will further bolster resilience, improve capital quality, and strengthen liquidity monitoring,” he said.

The CBN boss disclosed that with just four months to the conclusion of the recapitalisation exercise, the process remains firmly on track.

“As we strengthen the capacity of our banks, stress-testing this year confirms that Nigeria’s banking sector remains fundamentally robust.

Key financial soundness indicators overwhelmingly satisfied prudential benchmarks during the year,” Cardoso added.

He said the apex bank is reinforcing operational discipline to ensure the financial system serves all Nigerians reliably.

“Our starting point was a comprehensive, end‑to‑end review of the entire cash lifecycle: from production, to transportation, to distribution, and eventual access by consumers.

This holistic assessment enabled us to address root causes rather than symptoms.

“As a result, we recalibrated our cash‑printing models, issued guidelines on the optimal ATM‑to‑card ratio, strengthened requirements for CBN approval before ATM or branch closures, enforced sanctions on banks whose ATMs fail to dispense cash, and intensified supervision of payment agents and POS operators nationwide,” he said.

The CBN said a limited number of institutions remain subject to ongoing regulatory and judicial processes, which are being addressed through established supervisory and legal frameworks. All banks remain fully operational, ensuring continued access to banking services for customers.

The programme has strengthened capital adequacy ratios (CAR), with the sector maintaining levels above international Basel benchmarks. Minimum CAR thresholds remain at 10 per cent for regional and national banks and 15 per cent for banks with international authorization. The recapitalisation, implemented alongside an orderly exit from regulatory forbearance, has improved asset quality, reinforcing balance sheet transparency and overall financial system stability.

According to the CBN, to safeguard these gains, the CBN has strengthened its risk-based capital adequacy framework, requiring banks to conduct regular stress testing across defined scenarios and maintain appropriate capital buffers.

Key regulatory measures, including prudential guidelines and the supervisory framework, are subject to periodic review to support ongoing strengthening of governance, risk management, and sector resilience.

“The recapitalisation programme was carried out without disruption to banking services, ensuring continuous access for individuals and businesses throughout the process. The successful completion of the programme establishes a stronger and more resilient banking system, better positioned to support lending, mobilise savings, and withstand domestic and global shocks,” the bank said.

The apex bank reiterated its commitment to a stable, transparent, and resilient financial system that inspires confidence among depositors, investors, and the broader public, and to advancing the sustainability of the nation’s financial architecture.

A new look at compliance in the banking sector

The CBN, Cardoso said, has equally established a dedicated Compliance Department, now fully operational, with mandates covering financial crime supervision, market conduct, enterprise security, corporate governance, and Environmental, social, and governance (ESG).

According to the CBN boss, the process enforcing stronger controls on raised funds is ongoing with the redesigning of the credit‑risk framework expected to ensure that raised funds are well managed by financial institutions.

Previously, banks were awash with post recapitalisation funds, with analysts predicting that without proper risk management policies and regulatory controls, chances of misapplying such raised funds through risky loans remain high.

To guard against such occurrence, Cardoso stated: “As recapitalisation progresses, we are redesigning the credit‑risk framework to enforce stronger governance, greater transparency, and firmer accountability across the sector. We are determined to break the boom‑and‑bust cycle that has accompanied past recapitalisation efforts.”

Already, the CBN Credit Risk Management System (CRMS) is web-enabled, allowing banks and other stakeholders to dial directly into the CRMS database to render statutory returns or conduct status enquiry on borrowers. Also, the CBN is in the process of integrating the CRMS with other systems operating in the banks to make it more efficient.

In a report titled: “Nigeria’s macro headwinds trigger bank recapitalisation” Deloitte, a global accounting and audit firm, said the upward review of banks’ capital base from N50 billion to N500 billion depending on the type of licence held by the bank, remains an essential action required to boost capital adequacy needs of the Nigerian financial industry.

Nigeria banks’ capital adequacy, the report says, has been significantly impacted by macroeconomic challenges such as high inflation and interest rates, currency volatility and forex illiquidity.

“The upward revision will ensure that Nigerian banks have the capacity to take on bigger risks and stay afloat amid both domestic and external shocks. It also means increased liquidity position of banks, which will help broaden their loss-bearing capabilities,” the report said.

Tightening screws on cybersecurity

The Central Bank of Nigeria (CBN) is tightening the screws on cybersecurity, and this time, it wants the industry to grade itself first.

The CBN recently directed banks, fintechs, and other financial institutions to complete a new cybersecurity self-assessment tool (CSAT), a structured supervisory instrument designed to expose how prepared, or unprepared, they are for cyber threats.

Deposit money banks have three weeks to comply. Other financial institutions, including microfinance banks, payment service providers, payment service banks, finance companies, and development finance institutions, get five weeks.

The new directive is part of the regulator’s latest effort to strengthen Nigeria’s digital banking infrastructure against a surge in cyberattacks.

The CBN’s latest move signals a shift from reactive enforcement to proactive surveillance, at a time when Nigeria’s financial system is becoming more digital and more vulnerable.

The CSAT goes deep into how institutions run their security and explores cybersecurity governance, who is accountable, and how seriously it is treated. It interrogates risk management frameworks, technology and third-party risks, incident response readiness, and overall operational resilience.

Also, Nigeria’s financial sector is entering a critical transition phase as a new Anti-Money Laundering (AML) directive from the Central Bank of Nigeria (CBN) forces banks and fintech firms to overhaul outdated systems, exposing deep-rooted weaknesses in data quality, technology infrastructure and skilled manpower.

The CBN has given financial institutions 90 days to submit detailed AML implementation roadmaps, a move industry experts say is less about compliance paperwork and more about compelling a full-scale technology reset across the ecosystem.

The directive comes at a time when Nigeria’s digital finance sector is expanding rapidly, driven by mobile banking, fintech innovation and increased cross-border transactions.

However, compliance systems have not kept pace with this growth, leaving institutions vulnerable to fraud, illicit flows and regulatory breaches.

In this context, industry conversations have taken on a more technical and forward-looking tone. At a high-level workshop titled “Bank Capital Stress Testing: Getting the CBN Directive Right,” organised by DataPro Limited, participants were urged to rethink stress testing not as a compliance exercise, but as a diagnostic tool.

Delivered by Mr. Idris Shittu Adeleke, a member of the DataPro Rating Team and an enterprise risk management expert, the session underscored the shift from static reporting to dynamic risk assessment. The emphasis was on aligning capital buffers with actual risk exposure, rather than regulatory minimums.

The workshop also highlighted the operational demands of the new framework, including portfolio-wide data aggregation, migration of credit exposures, and integration of risk, finance, and compliance functions. For many institutions, these requirements represent a significant escalation in both analytical depth and governance oversight.

More importantly, the discussions reinforced a central point: compliance with capital thresholds is no longer sufficient. What matters is the resilience of that capital under adverse conditions.

This shift aligns with broader regulatory objectives. Nigeria’s ambition to build a $1 trillion economy by 2030 implies a banking system capable of financing large-scale infrastructure and absorbing economic shocks.

In that context, capital adequacy must be measured not only by size but also by durability.

According to the DataPro workshop, the transition remains risky. The introduction of stricter provisioning rules and forward-looking stress assumptions could compress capital buffers in the short term, particularly for banks with concentrated exposures. It may also create a divergence between regulatory capital and market perceptions, as investors reassess the quality of bank balance sheets.

Adeleke maintained that for regulators, the challenge will be to maintain credibility without triggering unintended instability. For banks, the task is more immediate: to reconcile the success of recapitalisation with the rigour of stress testing.

As the March 31 deadline passes this week, the narrative of Nigeria’s banking sector will shift from one of capital accumulation to one of capital validation. The real test will not be how much has been raised, but how much can endure. And in that transition, from quantity to quality, lies the defining uncertainty of the moment.

Nwadike is an Abuja-based financial analyst