In line with his commitment to support the expansion of the Nigerian economy and also support President Bola Tinu- bu’s $1trn economy aspiration by 2030, the Governor of the Central Bank of Nigeria, Olayemi Cardoso, is pushing ahead with Nigeria’s banking sector reform.

At a presentation in October at the London Business School, Cardoso revealed that financial institutions that are not able to meet the capital requirement for their category would have to be down- graded.

“With the banking recapitalisation, we left the door open in terms of the category of banking licence you decide to adopt. If you feel that you cannot meet your capi- tal requirement, you can downgrade your licence and move into another category of banks,” he said.

This comment is reminiscent of a simi- lar comment from a previous CBN Gov- ernor, Sanusi Lamido Sanusi, the Emir of Kano, who said the country needed all types of banks – large banks as well as small and medium-sized banks, which in many cases are better suited to support- ing segments of the economy that larger banks might consider too small for their balance sheets.

Following his appointment as CBN Gov- ernor in 2023, Olayemi Cardoso revived the recapitalisation agenda in March 2024. This policy is part of the CBN’s broader effort to strengthen Nigeria’s banking system and prepare for greater credit ex- pansion to support the economy. This was also the result of the currency devaluation that had taken place over the two decades. The equivalent of N25bn was now only around $18m.

To ensure a proper understanding of the earlier 2004 banking reform and the current exercise, African Banker has put together an explainer:

1. In 2004, the then CBN Governor, now Governor of Anambra State, Prof. Chukwuma Charles Soludo, initiated a N25bn ($200m) minimum capital base requirement to address systemic weak- ness in the banking sector.

2. The focus of the 2004 recapitalisa- tion exercise was to create a stable, competitive banking sector capable of financing large-ticket transactions and supporting economic growth under President Olusegun Obasanjo’s admin- istration, and also to weed out weak and poorly performing banks.

3. Banks were given 18 months to shore up their capital base, from N2bn to N25bn. There were 89 banks in the country at the time.

4. Options for raising the extra capital included mergers, acquisitions, or fresh capital injection. At the end of the ex- ercise, the number of banks reduced from 89 to 25 after 31 December 2005.

5. It led to the emergence of dominant players such as United Bank for Af- rica (UBA), Access Bank, Zenith Bank, Guaranty Trust Bank, and First Bank.

6. Total banking sector deposits, profit- ability, assets, and other performance metrics grew sharply. Today Nigeria has 10 banks in the African Business Top 100 listing, with six of Nigeria’s tier- 1 banks posting profits in excess of $400m.

7. Although the CBN under Godwin Eme- fiele announced that the industry was ripe for another round of recapitalisa-tion, it did not follow through.

8. Banks are required to meet higher paid-up capital requirements depend- ing on licence category. A deadline of 31 March 2026 was fixed. Different requirements were set for the different categories of bank:

• ₦500bn ($350m) → International banks (those with operations outside Nigeria)

• ₦200bn ($140m) → National banks (those operating nationwide only)

• ₦50bn ($35m) → Regional and mer- chant banks (smaller or specialized institutions)

• ₦20bn ($14m) → Non-interest banks (Islamic or ethical banks)

These figures are much higher than be- fore – for example, the old requirement for international banks was ₦50bn, signal- ling a tenfold increase for top-tier banks.

9. Only paid-up share capital (money shareholders actually put into the bank) and share premium (extra funds paid above the nominal share value) will count toward this new threshold.

10. Retained earnings – profits accumu- lated over time do not count. This means banks cannot simply reclassify past profits to meet the requirement; they must raise fresh equity capital from new or existing investors.

Smaller banks that can’t raise enough capital may need to merge or downgrade their licence (e.g. from national to re- gional).

11. Mergers, acquisitions, public offerings and rights issues to raise funds are ongoing. The reform has rekindled foreign investor appetite, especially for strategic stakes in Nigerian banks, resulting in increased activities on the Nigerian Exchange.

12. So far, a total of 14 banks have met their target, with others making ef- forts in different ways. 

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