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Fitch Ratings has affirmed that Nigerian banks are making steady progress in their recapitalization efforts, ensuring compliance with the Central Bank of Nigeria’s (CBN) 2026 capital requirement deadline while strengthening their capacity for business expansion.
The global rating agency disclosed in a statement that banks are successfully raising core capital to meet the new paid-in capital requirements, which will not only offset the impact of naira devaluation but also reduce the likelihood of major banking sector consolidation.
Recapitalization and Compliance Progress
In March 2024, the CBN introduced new capital requirements for commercial, merchant, and non-interest banks, mandating financial institutions to boost their share capital and share premium. Banks have three main compliance pathways:
- Raising fresh equity capital
- Engaging in mergers and acquisitions (M&A)
- Downgrading their operating licence
Fitch noted that most rated Nigerian banks are making substantial progress in meeting these requirements, with some already securing the necessary capital to maintain their licensing status.
“Almost all Fitch-rated banks have either raised capital or formally initiated the process. Access Holdings and Zenith Bank are the first to meet the N500 billion threshold required for an international licence,” the report stated.
Banks Advancing Towards Compliance
- First HoldCo, United Bank for Africa (UBA), and Guaranty Trust Holding Company (GTCO) are adopting a phased approach to recapitalization, securing shareholder approval for additional capital raises.
- Fidelity Bank and FCMB Group have completed initial capital raises but require additional funding to sustain their international licence status. These mid-tier banks must raise significantly higher capital relative to their balance sheets compared to larger institutions.
- Ecobank Nigeria Limited and Jaiz Bank required only small capital injections and have already achieved compliance.
- Stanbic IBTC Holdings has launched a rights issue to bolster capital and maintain its national licence.
Implications for Banking Sector Consolidation
Fitch believes that the strong investor appetite for Nigerian bank capital raises has decreased the likelihood of consolidation among first- and second-tier banks.
However, challenges remain for third-tier banks, such as Union Bank of Nigeria (UBN), which is still in breach of its 10% capital adequacy ratio (CAR) requirement. Fitch noted that:
“Wema Bank has shareholder approval to raise enough capital for its national licence and plans to launch the process in April. Coronation Merchant Bank recently secured board approval, but it is unclear if UBN and other unrated third-tier banks have obtained necessary approvals.”
The report suggests that M&A activity and licence downgrades remain more probable among smaller, third-tier banks.
Strengthened Capital Buffers to Support Growth
The ongoing capital raises are crucial in rebuilding banks’ capital buffers, which were negatively impacted by naira devaluation and increased U.S. dollar credit risks.
By strengthening capital reserves, banks will be better positioned to:
- Mitigate regulatory risks and market volatility
- Support business expansion and credit growth
- Ensure financial stability in Nigeria’s evolving banking landscape
While the current capital-raising efforts are unlikely to trigger rating upgrades for Nigerian banks with Long-Term Issuer Default Ratings (IDRs) of ‘B-’, they could lead to positive outlook revisions for some banks.
“Providing CAR compliance is restored, UBN and Ecobank Nigeria (both rated ‘CCC’) could see rating improvements. The capital raises are also likely to impact National Long-Term Ratings, which assess the relative creditworthiness of Nigerian issuers,” Fitch noted.
As Nigerian banks accelerate their recapitalization efforts, they are positioning themselves for greater resilience, improved regulatory compliance, and sustained business growth ahead of the CBN’s 2026 deadline.
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