In a bid to reinforce financial discipline and protect the integrity of the Nigerian banking sector, the Central Bank of Nigeria (CBN) has issued a stern warning to deposit money banks against raising capital from illicit sources. The directive forms part of a broader recapitalisation exercise aimed at enhancing the resilience of the financial system as Nigeria strives to achieve its ambitious $1 trillion economic target.
Speaking at the 36th Finance Correspondents Association of Nigeria and Business Editors seminar held in Abuja on Monday, Dr. Olubukola Akinwunmi, the Director of Banking Supervision at the CBN, emphasized the critical importance of ensuring that banks procure new capital only from verified and legitimate sources. “We ensure there is proper verification. And the verification is to ensure that we do not encourage illicit funds into our banking system. Illicit funds can only destabilise the banking system,” he asserted.
The recapitalisation exercise, announced on March 28, 2024, mandates that banks meet new minimum capital thresholds within a 24-month period, ending on March 31, 2026. Under these updated requirements, international commercial banks are expected to raise a minimum of N500 billion, national commercial banks N200 billion, regional commercial and merchant banks N50 billion, while non-interest banks at the national and regional levels are set to meet thresholds of N20 billion and N10 billion respectively.
Dr. Akinwunmi explained that the move was introduced to correct structural imbalances in the economy and to prepare banks for both domestic challenges and global economic headwinds. He highlighted that larger capital bases not only bolster banks’ capacity to absorb shocks—ranging from inflation and exchange rate volatility to political instability—but also enable them to provide critical financing to high-impact sectors such as infrastructure, manufacturing, and agriculture.
To facilitate the recapitalisation process, the CBN has outlined several flexible funding options available to banks. These include public offers, rights issues, mergers and acquisitions, and strategic foreign investments. The regulator has also emphasized that banks may opt to scale down their licence types, if necessary, without losing their regulatory standing. This flexibility is intended to ensure that banks can continue to operate effectively while raising the required capital.
A key element of the initiative is the return to the CBN’s original definition of share capital. This definition encompasses paid-up capital and share premium—a move that aligns with the legal provisions under the Banks and Other Financial Institutions Act (BOFIA) 2020. By strictly adhering to this definition, the CBN seeks to ensure that only legitimate and verifiable capital is counted towards the new requirements.
Beyond bolstering the stability of financial institutions, the recapitalisation programme is poised to have far-reaching benefits for the Nigerian economy. A stronger capital base in banks is expected to unlock more substantial investment in sectors crucial for national development and job creation. It is also anticipated to deepen financial inclusion, providing more citizens, especially those in rural areas, with access to formal banking services.
Ms. Emem Usoro, Deputy Governor of the CBN, reiterated the importance of a well-capitalised banking sector in attaining the country’s economic goals. “Nigeria must ensure a strong, stable, and well-capitalised banking sector if it hopes to attain its goal of becoming a one-trillion-dollar economy,” Usoro stressed during her keynote address. She described the recapitalisation drive as a critical policy response to evolving global financial dynamics, one that will enhance the sector’s capacity to fund and support development financing.
The banking sector has generally received the recapitalisation directive positively. Industry leaders, including Mr. Oliver Alawuba—the Group Managing Director of United Bank for Africa Plc—have underscored the need for Nigeria to ramp up its economic growth to meet long-term development targets. Alawuba observed that despite a modest growth rate of 3.84 percent in 2024, Nigeria must achieve double-digit growth to meet its ambitious $1 trillion GDP target. He pointed to the proactive stance of the CBN as a necessary step to drive the required transformation.
However, some analysts have raised concerns about the potential challenges that smaller banks might face in quickly meeting the new thresholds. To address these concerns, the CBN has committed to a phased implementation process. Banks are required to submit their recapitalisation implementation plans by April 30, 2025, which will detail their strategies for complying with the new requirements while maintaining operational stability.
As Nigeria’s banking sector embarks on this critical recapitalisation journey, the emphasis remains on transparency, accountability, and regulatory compliance. The CBN’s proactive approach to prohibiting illicit funds is integral to safeguarding the sector against potential abuses that could undermine investor confidence and systemic stability.
With the stage set for a transformative period in Nigerian banking, regulators, banks, investors, and all stakeholders are called upon to collaborate and drive forward the nation’s economic vision. Stronger banks not only translate to a more resilient financial system but also play a pivotal role in powering the broader economic engine of Nigeria.