As the Central Bank of Nigeria’s (CBN) recapitalisation deadline closes on March 31, 2026, Nigeria’s banking sector is entering a new phase, with attention shifting from capital raising to the real economic impact of the exercise.
The recapitalisation programme, launched in March 2024 with a 24-month compliance window from April 1, 2024, is designed to strengthen banks’ capital buffers, improve resilience to shocks, and position lenders to support economic growth, including the government’s $1 trillion economy target by 2030.
However, as the deadline lapses, key questions are emerging around ownership structures, lending behaviour, and whether the exercise will translate into tangible benefits for businesses and consumers.
Ownership Questions, Shareholder Concerns
One of the immediate concerns is whether fresh capital injections will reshape ownership structures or dilute existing shareholders, particularly minority investors who may have been unable to fully participate in capital-raising exercises.
The National President of New Dimension Shareholders, Patrick Ajudua, downplayed fears of dilution but said changes in ownership dynamics are likely.
“I don’t envisage dilution of shares, but am confident going by the funds available to the bank and an improved oversight of CBN on risk management, shareholders will be in for good returns on investment,” he said.
He added that the recapitalisation should drive stronger lending outcomes.
“As a shareholder, I expect that there will be increased lending to key sectors of the economy both in the short and long term with good returns,” Ajudua said.
Will Stronger Capital Drive Lending?
A central question is whether stronger balance sheets will translate into increased lending or whether banks will continue to favour safer investments such as government securities.
A Pinnacle Daily analysis shows that lending remained cautious in 2025 despite the CBN reducing the Loan-to-Deposit Ratio (LDR) to 50 per cent from 65 per cent in April 2024.
A review of major banks’ financial statements indicates that many lenders struggled to meet the threshold, reflecting the tension between lending to businesses and managing rising credit risks alongside attractive yields on securities.
SMEs Still on the Margins
Concerns are particularly acute for small and medium-sized enterprises (SMEs), which remain the most credit-constrained segment of the economy.
Data from the CBN Statistical Bulletin (2014–2023) shows that SMEs received just ₦1.01 trillion out of ₦199.63 trillion in total private sector credit over the past decade—about 0.51 per cent.
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This is despite SMEs accounting for about 84 per cent of employment and 48 per cent of gross domestic product, highlighting deep structural gaps in access to finance.
Rising Risks, Tight Lending Conditions
Banks’ appetite for lending is also being shaped by rising credit risks.
According to the CBN, the industry’s non-performing loan (NPL) ratio rose to about 7 per cent in 2025, exceeding the prudential limit of 5 per cent following the withdrawal of COVID-19 regulatory forbearance.
The development reflects the reclassification of previously restructured loans as bad debts, adding pressure on banks’ asset quality.
High borrowing costs have compounded the challenge, with the Monetary Policy Rate (MPR) at 27 per cent.
The Manufacturers Association of Nigeria has raised concerns over the impact of elevated rates on the real sector.
Its Director General, Segun Ajayi-Kadir, had said high borrowing costs are hindering production and undermining competitiveness.
When the interest rate remains high, it puts an enormous burden on businesses that bear the elevated cost of borrowing, he said.
Capital Raised, Deployment Questions Remain
The CBN Governor, Olayemi Cardoso, said banks have raised about ₦4.61 trillion in fresh capital, with nearly 27 per cent sourced from foreign investors.
He also disclosed that 30 of the 33 banks met the new capital requirements through rights issues, initial public offerings and private placements.
While the capital raise marks a milestone, analysts say the bigger test lies in how effectively it is deployed.
Speaking with Pinnacle Daily, Head of Financial Institutions Rating at Agusto & Co., Ayokunle Olubunmi, said the focus must now shift to returns on capital.
“There’s a limit to what you (banks) can invest in. They can actually allocate to investment securities. Even if they want to invest in allocated investment securities, don’t forget that a portion of those investment securities are bonds and commercial papers issued by other entities.
“So, what you see is that money will trickle down into the economy either as loans or as investments in instruments.
He added that stronger capital positions should drive lending growth.
“We expect to see more lending activities, supporting the various sectors of the economy,” Olubunmi said.
Olubunmi also pointed to opportunities in SME financing, noting the scale of the segment within Nigeria’s economy.
“If you check the Nigerian business environment, you’ll notice that about 60 per cent of the businesses that operate in Nigeria are actually SMEs.
“And if you now add the MSMEs to it, you’re getting towards almost the 90 per cent threshold. So, what you see also is that whether the bank likes it or not, they have to lend to those SMEs,” he said.
He noted that the definition and threshold for SMEs vary across banks, adding that some banks, including those that do not traditionally serve the segment, should increasingly explore opportunities within the space.
According to him, the breadth of the SME segment allows banks to identify viable lending niches, while institutions with a core focus on MSMEs are expected to deepen credit to the sector.
He expressed optimism that recapitalisation would drive a significant increase in lending to SMEs.
Beyond Capital, The Real Test
As the recapitalisation phase closes, analysts believe the focus will now shift to outcomes, whether stronger banks can deliver meaningful credit expansion and support economic growth.
They also believe that beyond meeting regulatory thresholds, the success of the exercise will ultimately depend on whether businesses and consumers feel the impact through improved access to finance.
Alex is a business journalist cum data enthusiast with the Pinnacle Daily. He can be reached via ealex@thepinnacleng.com, @ehime_alex on X
