Banks Attract 27% Foreign Funds, CBN Warns Of Spillover Risks

The Governor of the Central Bank of Nigeria, Olayemi Cardoso, has raised concerns over growing cross-border financial risks as foreign investors accounted for 27 per cent of the N4.61tn raised by Nigerian banks under the ongoing recapitalisation programme.

Speaking at the 4th Annual IMF/AFRITAC West 2 High-Level Executive Forum for Financial Sector Regulation and Supervision held in Abuja, Cardoso said the increasing participation of foreign capital in Nigeria’s banking sector underscores the need for stronger regulatory coordination across Africa.

According to him, while the inflow of foreign funds reflects investor confidence in Nigeria’s financial system, it also heightens exposure to external shocks and spillover risks that could destabilise domestic markets if not properly managed.

“As our banks expand across borders and attract significant foreign investment, the risks we face are no longer confined within national boundaries,” Cardoso said. “This makes collaboration among African regulators not just desirable, but essential.”

He noted that Nigeria’s banking sector has remained resilient despite macroeconomic challenges, including subsidy removal and foreign exchange reforms, adding that the recapitalisation drive launched in 2024 was designed to strengthen buffers and position banks for future growth.

The CBN governor disclosed that the programme has so far attracted N4.61tn in fresh capital, with nearly 27 per cent coming from foreign investors, while Nigerian banks continue to expand their footprint across African markets.

Cardoso stressed that the pace of financial integration across the continent is outstripping regulatory coordination, warning that fragmented oversight could amplify systemic risks during periods of global uncertainty.

To address this, he called for the adoption of shared prudential standards tailored to Africa’s unique economic realities, which would enable regulators to respond more effectively to emerging threats while supporting financial stability and inclusive growth.

On domestic reforms, Cardoso reaffirmed the apex bank’s commitment to strengthening corporate governance and enforcing stricter regulatory discipline.

He said the CBN has ended years of regulatory forbearance and introduced measures to restrict access to banking services for chronic loan defaulters.

“Our stance is clear, zero tolerance for regulatory breaches. We are reinforcing accountability, improving supervision, and ensuring that the banking system remains sound and resilient,” he said.

He added that the restriction placed on non-performing large obligors is aimed at promoting credit discipline, protecting depositors, and safeguarding the integrity of the financial system.

Cardoso also reiterated the bank’s commitment to orthodox monetary policy, noting that efforts are ongoing to restore price stability, strengthen policy credibility, and anchor market expectations.

On the role of technology, he said the CBN is taking a balanced approach to regulating financial technology firms, ensuring that innovation does not come at the expense of financial stability.

He referenced the bank’s Fintech Policy Report as part of broader efforts to build supervisory capacity in a rapidly evolving digital financial landscape.

In his remarks, the Director of IMF AFRITAC West 2, Ivohasina Fizara Razafimahefa, said the forum provides a platform for regulators to exchange ideas and develop coordinated responses to emerging risks, including those posed by fintech, artificial intelligence, and climate-related financial challenges.

The forum, which drew participation from central bank officials across six African countries, focused on strengthening regional cooperation and enhancing the resilience of financial systems in the face of evolving global risks.

Cardoso emphasised that sustained collaboration among African regulators will be critical in building a stable, integrated financial system capable of supporting long-term economic growth across the continent.