SBM Raises Recapitalisation Risks Facing Tier-2 Banks

Nigeria’s tier-2 banks face mounting pressure to either scale up operations or pursue mergers as the Central Bank of Nigeria’s (CBN) 2026 recapitalisation programme gathers pace, according to a new report by Lagos-based research firm, SBM Intelligence.

In its report titled “Capital, Competition, and Consolidation: How Nigeria’s Tier-2 Banks are Responding to the CBN’s 2026 Recapitalisation Order,” SBM warned that the new minimum capital requirements will significantly reshape the country’s financial landscape, forcing mid-tier lenders to adopt bold capital-raising strategies or risk being swallowed in a wave of consolidations.

The CBN in March 2024 directed international banks to raise their capital base to ₦500bn, national banks to ₦200bn, and regional banks to ₦50bn before March 2026.

The regulator said the policy aims to strengthen financial stability and position the banking sector to support the government’s ambition of building a $1trn economy.

SBM noted that while tier-1 banks have traditionally dominated the market with record profits, tier-2 lenders—First City Monument Bank (FCMB), Fidelity Bank, Stanbic IBTC, Sterling Bank, and Wema Bank have shown resilience, often outperforming expectations despite regulatory interventions, macroeconomic volatility, and investor skepticism.

The report highlighted the remarkable stock market performance of several mid-tier banks over the past five years. Fidelity Bank emerged as the standout performer, with its share price surging from ₦1.65 in 2020 to over ₦21.20 by mid-2025—representing growth of more than 1,100 per cent.

This surge was attributed to strong earnings, aggressive digital expansion, and successful capital raising efforts.

Wema Bank also recorded strong gains, climbing from ₦1.50 in 2020 to nearly ₦15.00 in 2025, driven largely by its digital transformation strategy.

FCMB’s share price rose steadily from ₦3.33 in 2020 to ₦9.25 by the first half of 2025, while Sterling Bank more than tripled in value, advancing from ₦1.70 to ₦6.16 during the same period.

To meet the CBN’s recapitalisation thresholds, the banks are implementing aggressive fundraising programmes.

FCMB Group is pursuing a three-phase plan worth ₦400bn, including a ₦144.6bn public offer oversubscribed by 33 per cent, a convertible note issuance expected to raise ₦20–40bn, and planned divestments of minority stakes in subsidiaries such as Credit Direct Limited and FCMB Pensions Limited. The bank also plans to attract offshore funding through private placements.

Fidelity Bank has raised over ₦270bn through an oversubscribed public offer and rights issue.

With shareholder approval to increase its issued share capital to ₦36.7bn, the lender is preparing for the final stage of its capital-raising programme to meet or surpass the ₦500bn benchmark for international banks.

Sterling Financial Holdings is executing a multi-stage plan involving private placements, rights issues, and a $400m public offering.

Wema Bank is combining a ₦150bn rights issue with a ₦50bn private placement after successfully raising ₦40bn in 2023.

SBM Intelligence warned that despite their resilience, Nigeria’s tier-2 banks remain at a critical juncture. The research firm predicted that as 2026 approaches, mergers and alliances among mid-tier lenders are likely to accelerate.

“The financial performance of these banks in 2025 underscores their capacity to compete and thrive, even as tier-1 institutions consolidate their dominance,” the report stated.

“However, their ability to navigate regulatory headwinds, leverage technology, and execute bold capital strategies will determine their place in the next chapter of Nigeria’s banking evolution.”

Analysts say while strong capital market performance gives some lenders a head start, rising funding costs, increased competition for deposits, and the push for non-interest income will test the resilience of the sector in the coming months.