The Central Bank of Nigeria (CBN) has issued a directive mandating affected banks to submit comprehensive Capital Restoration Plans. This forms part of the apex bank’s strategy to phase out regulatory forbearance, ensure macro-financial stability, and promote sound banking practices.
The directive, outlined in a circular dated July 8, 2025, and signed by Olubukola Akinwunmi, Director of Banking Supervision at the CBN, requires banks with capital deficiencies or asset quality deterioration to present detailed recovery strategies. These plans are expected to be submitted no later than the 10th working day after the end of each financial quarter, starting from June 30, 2025.
According to the circular, the Capital Restoration Plan must outline specific actions to restore full compliance with regulatory capital and asset quality standards. These include cost optimisation initiatives, reduction of risk-weighted assets, significant risk transfers, and strategic business model reviews.
“The plan must cover the entire period until full normalisation of capital and asset quality indicators are achieved,” the circular stated. The central bank emphasized that these plans would undergo strict regulatory scrutiny and would serve as a foundation for ongoing supervisory monitoring and engagement.
Furthermore, the CBN directed all affected financial institutions to halt dividend payments, employee bonuses, and investments in foreign subsidiaries until full compliance is restored.
Effective from June 30, 2025, banks are also required to submit detailed quarterly disclosures to enhance transparency and regulatory oversight. These include:
Provisioning status and reconciliation of affected credit exposures
Capital Adequacy Ratio (CAR) calculations, with and without transitional reliefs
Classification migration data for restructured or impaired loans
Disclosure of Additional Tier 1 (AT1) capital instruments, including issuance terms and utilization
The CBN noted that these measures are part of its structured approach to exiting the regulatory forbearance regime, which was introduced during previous periods of economic strain. The central bank described the policy shift as a “firm but supportive framework” that reflects its commitment to responsible banking practices and macro-financial stability.
The regulatory forbearance regime was initially introduced to support the financial sector during periods of economic turbulence, especially during the COVID-19 pandemic and the subsequent FX liquidity crunch. It allowed banks temporary relief from strict regulatory requirements to prevent systemic disruptions.
However, with improved economic fundamentals, including rising foreign reserves, reduced deficit monetization, and reforms under the current administration, the CBN believes the time is ripe for banks to restore financial discipline and align with Basel III standards.
Market analysts see the move as a positive signal that Nigeria’s financial system is gradually returning to pre-crisis strength. However, it poses challenges for undercapitalized banks, which must now devise sustainable recovery strategies or face possible sanctions, including restrictions on operations or forced mergers.
According to industry sources, banks most affected by FX loan losses, Naira devaluation, and non-performing loan surges will now be under tighter scrutiny. Analysts also predict that Tier-2 banks may explore capital raising efforts through equity or subordinated debt issuance to meet regulatory thresholds.
By insisting on credible and actionable capital restoration plans, the CBN aims to reinforce investor and depositor confidence, especially in light of recent bank failures and ongoing efforts to maintain financial system integrity.
In her comments earlier this month, CBN Deputy Governor Aisha Ahmad noted that “Nigeria’s banking sector must demonstrate resilience not only through capital buffers but through transparent governance and long-term sustainability models.”
As global economic uncertainties persist and domestic inflation remains high, the CBN’s latest directive underscores the need for Nigeria’s banking sector to prioritize prudence, foresight, and regulatory compliance.