The Central Bank of Nigeria (CBN) has directed deposit money banks to submit detailed capital restoration plans by the end of this week as it ends key pandemic-era regulatory concessions in a move to reinforce the banking sector’s resilience amid growing macroeconomic pressures.
In a circular published on its official website on Monday, the apex bank instructed lenders to provide a “comprehensive capital restoration plan” to address any capital shortfalls identified in their books.
Banks have until the 10th working day following the end of the quarter from June to file their plans, which must cover their current provisioning status, exposure to restructured loans, capital adequacy ratios and any additional Tier 1 capital instruments.
“The submitted plans will be subject to regulatory review and approval,” the circular stated, signalling the CBN’s intention to monitor compliance closely as it phases out support measures introduced during the Covid-19 crisis.
Effective June 30, the CBN has formally scrapped relief measures that had allowed banks to exceed single obligor limits and issue high-risk loans without setting aside full provisions, concessions originally designed to sustain credit flows during the pandemic’s peak economic disruptions.
The policy shift reflects the regulator’s renewed focus on shoring up financial system stability as the country contends with double-digit inflation, sluggish economic expansion, and the lingering effects of multiple currency devaluations.
In a further tightening of sector oversight, the central bank last month barred lenders under regulatory forbearance from paying dividends, awarding director bonuses, or making new foreign investments.
Earlier in 2024, the CBN announced a tenfold increase in minimum capital requirements for Nigerian banks, compelling operators to strengthen their balance sheets and better position themselves for external shocks.
Analysts say the latest directive underscores the regulator’s determination to enforce stronger risk management and provisioning practices, particularly as lenders adapt to elevated non-performing loans and macroeconomic headwinds.
“This marks a clear pivot away from crisis-era flexibility towards stricter prudential discipline,” said one industry analyst who asked not to be named. “The CBN wants to ensure that banks remain sufficiently capitalised to absorb shocks and support real sector lending in a sustainable manner.”
Bank executives are expected to finalise their capital adequacy recalculations this week, ahead of formal submission deadlines. Industry sources indicate that some lenders are already engaging advisors on recapitalisation options, including fresh capital raising through rights issues, mergers, or Tier 1 capital instruments.
The central bank has not yet indicated whether it will grant extensions to institutions unable to meet the capital requirements within the specified timeline.
Sector observers will also be watching for further guidance on how the CBN intends to enforce compliance and manage undercapitalised banks that fail to meet the new prudential thresholds.
Nigeria’s banking sector remains a crucial pillar of the economy, providing critical credit flows to businesses and households despite challenges related to foreign exchange scarcity, high operational costs, and legacy loan book risks.
