The Central Bank of Nigeria's (CBN) recapitalisation exercise is set to revolutionise the country's banking industry, with the goal of achieving a $1 trillion economy by 2030. The exercise, which began on April 1, 2024, and is expected to conclude by March 31, 2026, aims to strengthen the financial system, support economic growth, and improve confidence in the banking sector.
According to CBN Governor Olayemi Cardoso, the recapitalisation policy is designed to ensure Nigerian banks have the capacity to take bigger risks, stay afloat in times of trouble, and support different sectors of the economy. The new minimum capital requirements for commercial banks are N500 billion for international licenses, N200 billion for national licenses, and N50 billion for regional licenses.
The recapitalisation exercise is expected to have a positive impact on the economy, with analysts predicting it will address declining consumer purchasing power, strengthen government institutions, de-risk some sectors of the economy, and reduce bureaucratic bottlenecks. The exercise is also expected to lead to mergers and acquisitions, with weaker banks potentially merging with stronger ones to meet the capital thresholds.
As banks scramble to meet the new requirements, they are exploring innovative strategies to raise capital, including digital banking expansion, fintech collaboration, and sustainable finance. The CBN has outlined three broad response pathways for banks: raise funds, restructure, or exit/divest.
The recapitalisation exercise is not without its challenges, however. Banks may face financial strain, and there is a risk that they may pass on the burden to customers through increased fees and charges. Nevertheless, the CBN is confident that the exercise will ultimately lead to a more resilient and growth-oriented financial landscape for Nigeria.
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