CBN-led Bank Recapitalisation Prepares Nigeria Economy For Growth, Stability – IMF

The International Monetary Fund (IMF) has acknowledged the strategic impact of the just concluded bank recapitalisation in Nigeria, saying the exercise is paying off. The Fund said the exercise embarked by the Olayemi Cardoso-led Central Bank of Nigeria (CBN) was the right decision, given the ongoing volatility in global oil supply that requires banks to secure sufficient buffers in times of stress. A well recapitalized Nigeria banks are ready tools for fighting inflation and sustaining a two-year economic growth and stability projection for Nigeria by the IMF.

This year will emerge as one of the most remarkable in a decade. It has seen the emergence of stronger and more resilient banks, higher reserves estimated at $51bn by year-end and determination to achieve single digit inflation rate.

It is part of the long-term benefits of the critical economic reforms embarked by the fiscal and monetary authorities to strengthen the financial system and economy.

At the 2026 IMF/World Bank Spring Meetings in US, the Fund acknowledged the significant milestone created by the bank recapitalisation in Nigeria economy.

IMF endorsed Nigeria’s banking sector recapitalisation drive, noting that stronger capital buffers were already proving effective in cushioning the financial system against external shocks.

The Fund stressed that stronger fiscal positions remained essential for emerging markets to withstand volatile global capital flows and reduce vulnerability to sudden market shifts as seen with the ongoing oil prices volatility over Middle East crisis.

Speaking at the presentation of the Global Financial Stability Report at the Spring Meetings, IMF Financial Counsellor and Director of the Monetary and Capital Markets Department, Tobias Adrian, said recapitalisation efforts tend to show their value most clearly during periods of stress.

He noted that building a well-capitalised banking system remains central to global financial stability, particularly as economies navigate heightened uncertainty.

He said: “Concerning bank recapitalisation, it is in times of stress where the value of bank capital really comes to the fore. So, what we are aiming at for global financial stability is a banking sector that is capitalised against adverse shocks.

Andrian added that the capital raised by Nigerian banks would be significantly helpful in times of stress, keeping them better capitalized against external shocks.

Adrian said: “Of course, it’s in times of stress where the value of bank capital really comes to the fore, right? So, what we are aiming at for global financial stability is a banking sector that is capitalized against adverse shocks. So yes, bank recapitalizations are very welcome and are paying off, particularly under times of stress”.

Also speaking at the presentation of the World Economic Outlook, IMF, Economic Counsellor and Director of the Research Department from the IMF, Pierre-Olivier Gourinchas, projected a two-year growth prospects for Nigeria, pegging growth for 2026 and 2027 at 4.1 per cent and 4.3 per cent respectively.

He said the global economy disrupted with the outbreak of war in the Middle East, rising commodity prices, firmer inflation expectations, and tighter financial conditions, will grow at 3.1 per cent in 2026 and 3.2 per cent in 2027.

For Nigeria, he highlighted the impact of soaring oil prices on cost of living and the sensitivity of the inflation expectations.

He said that Nigeria’s policies need to be agile, carefully manage the trade-offs involved in ramping up defense spending, and lay the foundation for a sustained recovery.

He explained that after withstanding higher trade barriers and elevated uncertainty last year, global activity now faces a major test from the outbreak of war in the Middle East.

“Assuming that the conflict remains limited in duration and scope, global growth is projected to slow to 3.1 percent in 2026 and 3.2 percent in 2027. Global headline inflation is projected to rise modestly in 2026 before resuming its decline in 2027,” he said.

The IMF said although no central bank can influence global energy prices on its own, the markets are already pricing in higher policy rates.

However, provided inflation expectations remain well entered, central banks can afford to wait and watch for now, but they must be attentive to risks and communicate clearly their readiness to act decisively to maintain price stability.

In most cases, exchange rates should be allowed to adjust, allowing central banks to focus on their mandates.

Most countries don’t have that luxury anymore. Where support for the most vulnerable is needed, targeted and temporary measures should be deployed consistent with medium term plans to rebuild fiscal buffers and avoiding stimulating demand where inflation is rising.

Finally, the Fund explained that if financial conditions tighten sharply, as in our severe scenario, and global activity deteriorates markedly, monetary and fiscal policy should be ready to pivot to support the economy and safeguard the financial system alongside appropriate financial and liquidity policies.

The banking sector recapitalisation marks the most significant banking reform since 2005, modernising regulatory and risk management frameworks. The initiative reflects strong coordination among the CBN, the Ministry of Finance, and the capital markets.

With the recapitalisation exercise over, the next phase of ensuring a strong and virile financial system is building stricter credit-risk culture ensuring that raised funds are loaned creditably to key sectors- infrastructure, energy, manufacturing, and technology among others.

That explains why the Central Bank of Nigeria (CBN) is championing the credit‑risk framework to enforces stronger governance, greater transparency, and firmer accountability across the financial sector.

This will enable the regulator to break the boom‑and‑bust cycle that has accompanied past recapitalisation efforts. Previous records, especially during the 2005 recapitalisation, showed that banks tended to lend more.

Speaking during a forum in Lagos, CBN Governor, Olayemi Cardoso, said the apex bank will be enforcing stronger governance, greater transparency, and firmer accountability to protect new capital raised by banks.

“Sustainable economic growth is unattainable without a resilient financial system. This recapitalisation ensures Nigerian banks can fund the scale of transactions needed to drive a $1tn economy.” Cardoso, said.

“The recapitalisation programme has strengthened the capital base of Nigerian banks, reinforcing the resilience of the financial system and ensuring it is well-positioned to support economic growth and withstand domestic and external shocks,” he added.

The CBN had, on March 28, 2024 announced a two-year bank recapitalisation exercise which commenced on April 1, 2024. The recapitalisation plan requires minimum capital of N500bn, N200bn and N50bn for commercial banks with international, national and regional licences respectively. There is also N20bn for national non-interest banks and N10bn for regional non-interest banks. The 24-month timeline for compliance ended on March 31, 2026.

Cardoso, said the apex bank will be enforcing stronger governance, greater transparency, and firmer accountability to protect raised funds.

The recapitalisation programme aims to enhance the resilience, competitiveness, and lending capacity of Nigeria’s financial system, positioning it to support the Federal Government’s aspiration for a $1tn economy.

The exercise has also helped in building banks “fit for purpose” in a trillion-dollar economy, the sector can sustainably finance SMEs, export-oriented firms, and major infrastructure projects. The recapitalisation is expected to anchor financial inclusion and broaden access to credit nationwide.

The recapitalisation marks the most significant banking reform since 2005, modernising regulatory and risk management frameworks.

Banks that are yet to fully recapitalise remain functional and are in the process of recapitalisation.

At the end of the two-year recapitalisation project, the CBN confirmed that 33 banks raised combined N4.65tn.

In a statement, jointly signed by CBN Director, Banking Supervision Department, Olubukola A. Akinwunmi, and Acting Director, Corporate Communications Department, Mrs. Hakama Sidi Ali, described the exercise as successful, adding that 33 banks met the revised minimum capital requirements established under the programme.

They said: “Over the 24-month period, Nigerian banks raised a total of N4.65tn in new capital, strengthening the resilience of the financial system and enhancing its capacity to support the economy. The programme recorded strong participation from both domestic and international investors, with 72.55 per cent of capital sourced locally and 27.45 per cent from international markets, reflecting sustained confidence in the Nigerian banking sector”.

Governor Cardoso commented: “The recapitalisation programme has strengthened the capital base of Nigerian banks, reinforcing the resilience of the financial system and ensuring it is well-positioned to support economic growth and withstand domestic and external shocks.”

Continuing, Cardoso said Nigeria’s banking system remains fundamentally sound and resilient, a cornerstone of our financial stability.

“At the same time, we remain vigilant to emerging risks, including cyber threats, credit-concentration pressures, and operational vulnerabilities. These are being addressed through strengthened risk-based supervision and our ongoing transition to Basel III, which will further bolster resilience, improve capital quality, and strengthen liquidity monitoring,” he said.

The CBN boss disclosed that with just four months to the conclusion of the recapitalisation exercise, the process remains firmly on track.

“As we strengthen the capacity of our banks, stress-testing this year confirms that Nigeria’s banking sector remains fundamentally robust. Key financial soundness indicators overwhelmingly satisfied prudential benchmarks during the year,” Cardoso added.

He said the apex bank is reinforcing operational discipline to ensure the financial system serves all Nigerians reliably.

“Our starting point was a comprehensive, end‑to‑end review of the entire cash lifecycle: from production, to transportation, to distribution, and eventual access by consumers. This holistic assessment enabled us to address root causes rather than symptoms”.

“As a result, we recalibrated our cash‑printing models, issued guidelines on the optimal ATM‑to‑card ratio, strengthened requirements for CBN approval before ATM or branch closures, enforced sanctions on banks whose ATMs fail to dispense cash, and intensified supervision of payment agents and POS operators nationwide,” he said.

The CBN said a limited number of institutions remain subject to ongoing regulatory and judicial processes, which are being addressed through established supervisory and legal frameworks. All banks remain fully operational, ensuring continued access to banking services for customers.

President, Bank customers Association of Nigeria (BCAN), Dr. Uju Ogubunka, said the exercise, presented opportunity for the lenders to provide cheaper loans, expand their operations and provide improved services to customers.

“The banks have raised significant funds to shore up their capital bases. Now, we expect them to improve on service quality and shun excess charges,” he said.

Also speaking, President, Association of Bureaux De Change Operators of Nigeria (ABCON), Dr. Aminu Gwadabe, agreed with Ogubunka on the need for low interest loans.

Gwadabe said: “We need cheaper loans. Big capital should reflect on cheaper and more affordable loans. Also, banks should lend for longer terms, and projects that support the economy.

He said that more capital will increase banks’ buffers and hasten Nigeria’s path to achieving $1tn economy.

“Now they have bigger capital, we expect the banks to come out and compete with other global banks. The Nigerian banks need to compete favourably at international stage,” he said.

Continuing, Gwadabe said the era of high lending rates should also be over. “ We expect the interest charged by banks on loans to reflect international standards. We equally want the banks to de-risk agriculture to improve food security,” he said.