E-Financial
The Missing Pieces in Nigeria’s Banking Recapitalisation
By Blaise Udunze
Nigeria’s economy will be experiencing yet another round of reform; after the new tax implementation, the banking sector recapitalisation exercise will begin within less than three months until the March 31, 2026, deadline. The Central Bank of Nigeria (CBN) Governor, Olayemi Cardoso, disclosed that 27 banks have tapped the capital market via public offers and rights issues.
The figures show that of 21 the 37 commercial, merchant, and non-interest banks in the country have met or exceeded the revised minimum capital thresholds of N500 billion for internationally authorised banks, N200 billion for national banks, N50 billion for regional banks, and N10-20 billion for non-interest banks. With the developments above, policymakers are betting that stronger balance sheets will help banks withstand macroeconomic shocks, finance growth, and restore confidence in the financial system. On the surface, the logic is sound, capital matters. But history warns us that capital alone is not a cure-all.
Nigeria has been here before, going by the 2004-2005 era of the then-governor of CBN, Charles Soludo, whose banking consolidation dramatically reduced the number of banks from 89 to 25 and created national champions. Yet barely five years later, the system was back in crisis, requiring regulatory intervention, bailouts, and the creation of the Asset Management Corporation of Nigeria (AMCON) to absorb toxic assets. The lesson here is clear, which revealed that recapitalisation that ignores structural weaknesses merely postpones failure.
If the current exercise is to succeed, the CBN must use it not only to raise capital but to repair the deeper fault lines that have long undermined the stability, credibility, and effectiveness of Nigeria’s banking sector.
More Capital isn’t Always Better Capital
The first and most critical issue is the quality of capital being raised. Disclosures made by the banks have shown that the combined capital base of about N5.142 trillion is already locked in by lenders across the different licence categories. Bigger numbers on paper mean little if the capital is not genuinely loss-absorbing. In past recapitalisation cycles, concerns emerged about funds being raised through related parties, short-term borrowings disguised as equity, or complex arrangements that ultimately recycled the same risks back into the system.
This time, the CBN must insist on transparent, verifiable sources of capital. Every naira raised should be traceable, free from conflicts of interest, and capable of absorbing real losses in a downturn. Otherwise, recapitalisation becomes an accounting exercise rather than a resilience-building one.
Why Corporate Governance Remains the Achilles’ Heel
Perhaps the most persistent weakness in Nigeria’s banking sector is corporate governance failure. Many bank crises have not been caused by macroeconomic shocks alone, but by poor board oversight, insider abuse, weak risk culture, and excessive executive power.
Recapitalisation provides a rare regulatory leverage point. The CBN should use it to reset governance standards, not just capital thresholds. Boards must be independent in substance, not just in form. Being one of the critical aspects of the banking challenge, insider lending rules should be enforced without exception. Risk committees in every financial institution must be empowered, not sidelined by dominant executives.
Without the apex bank fixing governance, new capital risks become fresh fuel for old excesses.
The Unresolved Burden of Non-Performing Loans (NPLs)
Data from the CBN’s latest macroeconomic outlook showed that the banking industry’s Non-Performing Loans ratio climbed to an estimated 7 percent, pushing the sector above the prudential ceiling of 5 percent. Nigeria’s banking sector continues to be drowned with high volumes and recurring non-performing loans (NPLs), and this is often concentrated in sectors such as oil and gas, power, and government-linked projects. Though with the trend of events, one may say that regulatory forbearance has helped maintain surface stability in the sector, no doubt it has also masked underlying vulnerabilities.
The truth is that a credible recapitalisation exercise must confront this reality head-on. Loan classification and provisioning standards should reflect economic truth, not regulatory convenience. Banks should not be allowed to carry impaired assets indefinitely while presenting healthy balance sheets to investors and the public.
Transparency around asset quality is not a threat to stability; it is a foundation for it.
How Foreign Exchange Risk Quietly Amplifies Financial Shocks
Few risks have damaged bank balance sheets in recent years as severely as foreign exchange volatility. Many banks continue to carry significant FX mismatches, borrowing short-term in foreign currency while lending long-term to clients with naira revenues.
During periods of FX adjustment, these mismatches can rapidly erode capital, no matter how well-capitalised a bank appears on paper. Recapitalisation must therefore be accompanied by tighter supervision of FX exposure, stronger disclosure requirements, and realistic stress testing that assumes adverse currency scenarios, not best-case outcomes.
Ignoring FX risk is no longer an option in a structurally import-dependent economy.
Concentration Risk and the Narrow Credit Base
Another long-standing weakness is excessive concentration risk. A disproportionate share of bank lending is often tied to a small number of large corporates or government-related exposures. While this may appear safe in the short term, it creates systemic vulnerability when those sectors face stress.
At the same time, the real economy, particularly SMEs and productive sectors, remains underfinanced because, over the years, Nigeria’s banks faced significant concentration risk, particularly in the oil and gas sector and in foreign currency exposure, while grappling with a narrow credit base characterised by limited lending to the private sector. This is due to high credit risk and tight monetary policy. Owing to this trend, recapitalisation should therefore be in alignment with policies that encourage credit diversification, improved credit underwriting, and smarter risk-sharing mechanisms, and not the other way round.
Therefore, it will be right to say that banks that grow larger but remain narrowly exposed do not strengthen the economy; they amplify its fragilities.
Risk Management in a Volatile Economy
The recurring inflation shocks, interest-rate swings, fiscal pressures, and external shocks are frequent features, not rare events, which show that Nigeria is not a low-volatility environment.
Currently, the Nigerian banking sector’s financial performance and investment returns are equally affected by various risks, including credit, liquidity, market, and operational risks.
Today, many banks still operate risk models that assume stability rather than disruption. Time has proven that risk management is essential for mitigating these risks and ensuring stability and profitability.
The apex bank must ensure that the recapitalisation process mandates robust, Nigeria-specific stress testing, and banks must demonstrate resilience under severe but plausible scenarios. This includes sharp currency depreciation, interest-rate spikes and sovereign stress. It must evolve from a compliance function to a strategic discipline.
Transparency and Financial Reporting
Investors, depositors, and analysts must be able to understand banks’ true financial positions without navigating a lack of transparent disclosures or creative accounting. Hence, public trust in the banking sector depends heavily on credible financial reporting.
The CBN should use recapitalisation to strengthen the International Financial Reporting Standard enforcement, disclosure standards, and audit quality. In championing this course, banks’ financial statements should clearly reflect capital adequacy, asset quality, related-party transactions, and off-balance-sheet exposures. Transparency is to enable confidence, not about exposing weakness.
Regulatory Consistency and Credibility
Policy credibility has been one of the greatest challenges for Nigeria’s financial regulators.
Abrupt changes, unclear timelines, and inconsistent enforcement undermine investor confidence and weaken reform outcomes.
Recapitalisation must be governed by clear rules, predictable timelines, and consistent enforcement. Both domestic and foreign investors need assurance that the rules of the game will not change midstream. Regulatory credibility is itself a form of capital.
Consumer Protection and Banking Ethics
While recapitalisation focuses on banks’ balance sheets, the public experiences banking through fees, service quality, dispute resolution, and ethical conduct. Persistent complaints about hidden charges and poor customer treatment erode trust in the system and a stronger banking sector must also be a fairer and more accountable one. It must be noted that strengthening consumer protection frameworks alongside recapitalisation will help rebuild public confidence and reinforce financial inclusion goals.
Too Big to Fail and How to Resolve Failure
Looking at what is obtainable in the system, larger, better-capitalised banks can also become systemically dangerous if failure resolution frameworks are weak. This requires that recapitalisation should therefore be accompanied by credible plans for resolving distressed banks without destabilising the entire system or resorting to taxpayer-funded bailouts, which has been the norm in the Nigerian banking sector today. The cynic might say that recapitalisation simply made big banks bigger and empowered dominant shareholders. However, a more prospective approach invites all stakeholders, including regulators, customers, civil society and bankers themselves, to co-design the next chapter of Nigerian banking; one that balances scale with inclusion, profitability with impact, and stability with innovation.
Clear resolution mechanisms reduce moral hazard and reinforce market discipline.
A Moment That Must Not Be Wasted
Recapitalisation is not merely a financial exercise; it is a governance and trust reset opportunity. If the CBN focuses solely on capital numbers, Nigeria risks repeating a familiar cycle of apparent stability followed by crisis.
The banking sector can lay a solid foundation that truly supports economic transformation if recapitalization is used to address governance failures, asset quality, FX risk, transparency, and regulatory credibility.
Nigeria does not just need bigger banks. It needs better banks, institutions that are resilient, transparent, well-governed, and trusted by the public they serve. Hence, it must be a system that creates a more robust buffer against shocks and positions Nigerian banking as a global competitor capable of funding a $1 trillion economy, as the case may be.
This recapitalisation moment must be about building durability, not just size. The cost of missing that opportunity would be far greater than the cost of getting it right.
Blaise, a journalist and PR professional, writes from Lagos and can be reached via: [email protected]
By Blaise Udunze
Governance is not complicated. It is about people and the resources entrusted to serve them. When resources are managed wisely, the people prosper, and prosperity spreads. Mismanage them, and poverty multiplies. Nigeria’s tragedy is not scarcity. It is stewardship.
President Tinubu
For decades, Nigeria, described as Africa’s largest oil producer, has earned hundreds of billions of dollars, yet remains home to some of the world’s poorest citizens. That contradiction is not accidental. It is systemic. It reflects policy distortion, institutional weakness, and a culture of impunity that has too often treated public wealth as political spoils rather than a national trust.
The Abuja-based Independent Media and Policy Initiative (IMPI) recently captured this paradox bluntly by saying, Nigeria’s poverty crisis is not the result of inadequate resources, but of persistent failure to manage them prudently and sustainably. It described the crisis as a “self-inflicted economic malady.” That phrase should trouble every public official.
Between 1980 and 2015, Nigeria rode multiple oil booms. Instead of converting windfalls into diversified productivity, the country succumbed to what economists call the Dutch disease. Oil revenues surged. The naira appreciated. Imports became cheaper. Domestic production became uncompetitive. Agriculture declined. Manufacturing withered.
IMPI’s analysis shows that between 1980 and 1986, exchange rate appreciation crippled local industries and turned Nigeria from a major agricultural exporter into a net food importer. Cocoa, palm oil, and rubber, once pillars of export strength, gave way to dependency. A parallel distortion emerged, the so-called “Nigerian disease.” Rural labour migrated to cities in search of oil-fueled wage spikes. Farming declined. Food insecurity deepened, which has continued to linger each day. Over-mechanised and poorly coordinated agricultural investments, uncompleted irrigation projects, and subsidies skewed toward politically connected elites widened inequality. Oil wealth created the wrong impression of prosperity while hollowing out the economy’s productive core.
Former Vice President Yemi Osinbajo once framed the issue plainly: Nigeria’s challenge is not geographical restructuring but resource management and service delivery. After decades of vast oil earnings, the uncomfortable question remains. Where is the infrastructure?
If mismanagement were purely historical, recovery might simply require time and discipline. But the problem is not confined to the past, and this is because between 2010 and 2026, an estimated $214 billion, roughly N300 trillion, has been flagged as missing, diverted, unrecovered, irregularly spent, or trapped in non-transparent fiscal structures. These figures reveal that they are not speculative but arise from audit reports, legislative investigations, civil society litigation, and investigative findings across administrations.
The oil sector alone provides sobering examples. In 2014, unremitted oil revenues triggered national outrage. Years later, audit queries continue to trail the Nigerian National Petroleum Company Limited. The names of institutions change. The pattern persists. The Central Bank of Nigeria has also faced audit alarms over trillions in unremitted surpluses and questionable intervention facilities. Auditor-General has flagged failures to remit operating surpluses into the Consolidated Revenue Fund, alongside hundreds of billions allegedly disbursed to unidentified beneficiaries under intervention schemes, which is alarming and a common fraudulent practice.
Across ministries, departments, and agencies, trillions have been cited in unsupported expenditures, unremitted taxes, procurement irregularities, and statutory liabilities left unrecovered. The institutions differ. The language of audit reports varies. The years change. The pattern does not.
A natural occurrence, which is the plain truth, and unarguably, is that when electricity funds disappear, the grid collapses. Also, when agricultural loans remain unrecovered, food prices surge. The same goes when social investment programmes stall due to bureaucratic lack of transparency; the vulnerable remain exposed. Nigeria borrows not only because revenue is insufficient but because leakage is persistent.
The 2026 fiscal projections sharpen the dilemma. This has continued to raise concern as seen in the proposed N58.47 trillion budget, which carries a N25.91 trillion deficit, with N15.9 trillion allocated to debt servicing. What signifies a systemic failure is that nearly half of the projected federal revenue will service past loans before development priorities are funded. The truth be told, borrowing is not inherently destructive. Economies such as the United States deploy deficit financing strategically to expand productivity. The difference lies in what the borrowing finances.
To date, Nigeria’s deficits are increasingly funded by recurrent obligations rather than productivity-enhancing infrastructure. This is why Nigeria’s domestic borrowing persistently crowds out private-sector credit, driving up interest rates and stifling enterprise. Time after time, the nation has continued to witness how weak revenue mobilisation, overt oil dependence, and institutional inefficiencies compound the strain, and for these reasons, public debt is projected to has surpass N177.14 trillion by the end of 2026, which is driven by the budget deficit in 2026 Appropriation Bill.
Based on what is obtainable in other advance country, debt becomes sustainable only when borrowed funds are channeled into growth-enhancing investments, institutions ensure transparency and value for money, and economic expansion outpaces debt accumulation. When these conditions weaken, deficits evolve into a fiscal trap.
Despite some of the challenges occasioned by mismanaged resources and leakages, policymakers project cautious optimism. The Central Bank forecasts GDP growth of approximately 4.49 percent, moderating inflation, and foreign reserves exceeding $50 billion. On paper, stability appears to be returning. But stability is not prosperity.
Take, for instance, between 2006 and 2014, Nigeria recorded average GDP growth rates of six to seven percent, peaking near eight percent. Yet poverty remained stubbornly high, judging by the lived experience of the populace. This shows that growth without inclusion is only an arithmetic, not development. Today, households confront elevated food prices despite the report that food inflation fell from 29.63 per cent in January 2025 to 8.89 per cent in January 2026, energy costs, and unemployment. Yes, one may say that the exchange-rate unification and fuel subsidy removal were economically rational reforms. However, without aggressive domestic production expansion and credible social safety nets, adjustment costs fall heavily on citizens.
The concept of the “resource curse,” coined by Professor Richard Auty, explains why resource-rich nations often experience weaker institutions and lower long-term growth than resource-poor peers. Nigeria truly exemplifies that irony. Yet the curse is not inevitable. This is because countries such as Norway and Botswana transformed natural resource wealth into long-term prosperity through disciplined institutions, sovereign wealth management, and uncompromising transparency, which happens to be foreign to Nigeria’s system. The difference was not geology. It was governance.
Former President Olusegun Obasanjo has never been quite over resource plundering as he lamented that Nigeria has squandered divine gifts. The same lies with the former Minister George Akume, who warned that no nation grows if a quarter of its resources are consistently mismanaged. The former Anambra governor, Peter Obi, observed bluntly that wealth cannot be entrusted to those without integrity. The United Nations is also amongst those who have repeatedly warned that mismanaged natural resources fuel instability and conflict. Where institutions are weak, resource wealth becomes combustible. Nigeria has navigated that edge for decades.
Nigeria does not suffer from a shortage of reform announcements. It suffers from a gap between announcement and enforcement. The Treasury Single Account was designed to consolidate public funds under constitutional oversight. Yet significant funds have periodically remained outside complete transparency. The problem is that audit findings often accumulate without visible recovery, prosecution, or systemic reform.
The reality is that if every naira saved from subsidy reform is not transparently reinvested in infrastructure, healthcare, education, and productivity, public trust will erode further. If intervention facilities are not tracked and repaid, agriculture will stagnate. If oil revenues are not fully remitted and independently audited, diversification will remain rhetorical, just as they have defined the system today. What will definitely propel a change when visible enforcement, recoveries, prosecutions, and institutional strengthening must replace quiet reports and circular memos.
President Bola Ahmed Tinubu stands at a consequential intersection due to the critical issues unfolding. His administration has initiated painful but necessary reforms in the areas of fuel subsidy removal, exchange-rate unification, and fiscal restructuring. One stands to say that these measures aim to restore macroeconomic order. But for a fact, macroeconomic stability is a foundation, not a destination. His presidency will either mark the beginning of Nigeria’s fiscal rescue or consolidate a system that mortgages tomorrow to survive today.
Human capital cannot remain peripheral. Education aligned with labour-market needs, vocational capacity, healthcare access, and social protection are economic multiplier, not welfare indulgences. Capital expenditure must prioritise integrated infrastructure like power transmission, logistics corridors, and digital connectivity, that unlocks productivity. Every earned naira must enter the Federation Account transparently. Every statutory surplus must be constitutionally remitted. Every diversion must carry a consequence.
One thing that must be understood today is that Nigeria’s future will not be determined solely by oil output or GDP growth percentages. It will be determined by whether resources translate into reliable electricity, functioning roads, expanding industries, competitive exports, and rising household incomes. A nation can borrow to build bridges. Or it can borrow to pay salaries. The former compounds growth. The latter compounds debt.
If deficits translate into visible infrastructure, industrial expansion, thriving private enterprise, and strengthened revenue generation, history will record this era as a bold recalibration. If not, it will be remembered as deferred reckoning.
Nigeria has been wealthy for decades. What it has lacked is disciplined guardianship of that wealth. End the era of systemic leakage and institutional silence, or preside over its continuation. The choice is stark but clear. The point is, this is not just about one leader’s legacy; it is about the future of over 200 million Nigerians and generations.
And for nearly 200 million Nigerians, the outcome will define not just a presidency, but a generation.
Blaise, a journalist and PR professional, writes from Lagos and can be reached via: [email protected]
Union Bank of Nigeria has reaffirmed its status as a going concern with stable operations, responding to media queries sparked by Central Bank Governor Olayemi Cardoso’s remarks at the 304th Monetary Policy Committee (MPC) briefing.
Union Bank
Cardoso clarified that banks under regulatory intervention face unique recapitalisation timelines due to their circumstances, distinct from others with more preparation time.
Union Bank’s Chief Brand and Marketing Officer, Mrs. Olufunmilola Aluko, said the Governor’s comments align with the bank’s messaging.
“The Governor’s remarks reinforce what has consistently been our position. Union Bank remains under strong regulatory oversight with a resilient franchise, stable operations, and uninterrupted service delivery,” Aluko stated.
She stressed that all customer deposits remain safe and secure, with the bank operating transparently within the regulatory framework and collaborating with the CBN on recapitalisation.
Union Bank pledged updates as engagements progress, prioritising customer protection, financial stability, and service continuity amid the system-wide strengthening programme.
Flutterwave has transformed from a modest Lagos venture into one of Africa’s most valuable fintech firms, processing billions in transactions yearly across 30+ countries and 150+ currencies.
Flutterwave
Founded in 2016 by Iyinoluwa Aboyeji, Olugbenga “GB” Agboola, and Adeleke Adekoya, it tackled Africa’s fragmented payments—siloed banks, mobile money gaps, and unreliable cross-border flows—with a unified API for seamless collections, payouts, and settlements.
Founding Vision
The trio spotted the pain: Aboyeji’s Andela faced border delays; Agboola drew from PayPal/Google; Adekoya handled compliance. Early wins included Uber Nigeria payouts from a Lekki co-working space, proving scalability amid lean ops.
Growth Milestones
2017–2020: $10M seed/Series A fueled West Africa push; Agboola took CEO helm post-Aboyeji; COVID boosted e-commerce volumes.
2021–2022: Unicorn at $1B+ (Series C, $170M); $3B+ valuation (Series D, $250M); partnerships with Microsoft, Uber; Send App for US diaspora.
2025–2026: Profitability focus yields better margins; 34 US licenses; Mono acquisition ($25–40M) bolsters open banking.
Challenges Overcome
Regulatory hurdles hit: Kenya 2022 freeze (cleared); Nigeria fraud claims (resolved, controls enhanced); culture probes led to reforms with ex-Mastercard/Stripe hires. These underscore multi-jurisdiction risks like FX curbs and cyber threats.
Nigeria’s Fintech Role
Flutterwave anchors alongside Paystack (Stripe-owned), Moniepoint, amid CBN cash curbs and AfCFTA trade boosts. Dual HQ in Lagos/SF eyes IPO post-profitability, cementing it as Africa’s payments backbone.
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