Nigeria’s Recapitalisation Policy Set to Reshape Banking Sector with Potential Mergers

Nigeria’s banking sector is poised for a significant transformation as new recapitalisation requirements introduced by the Central Bank of Nigeria (CBN) may drive a wave of mergers and acquisitions among smaller financial institutions. According to a recent S&P Global report, banks struggling to meet the new minimum capital thresholds may be forced to consolidate, leading to a decline in the total number of banks by 2025.

Despite this anticipated shift, S&P Global analysts assert that the stability of the banking industry remains intact, with the top-tier banks—which control 70% of total system assets—expected to maintain dominance.

“Although we expect the number of banks to decline as some smaller banks merge, this will not affect the stability of the sector,” the report stated.

CBN’s Recapitalisation Drive and Its Implications

In May 2024, the CBN implemented new capital adequacy requirements, compelling banks to significantly increase their minimum paid-up capital to strengthen financial sector resilience and stability. The updated regulations mandate:

• ₦500 billion for commercial banks with international licenses
• ₦200 billion for national banks
• ₦50 billion for regional banks

This regulatory overhaul has triggered strategic moves among leading financial institutions, with major banks seeking to bolster their equity positions through rights issues and public offers.

Banks Respond with Capital Raising Initiatives

Leading Nigerian banks have swiftly adapted to the policy shift by raising capital through regulatory-approved fundraising mechanisms. Zenith Bank, one of the country’s largest financial institutions, recently raised ₦350.4 billion, surpassing the new minimum capital requirement by ₦114.6 billion, well ahead of the May 2026 deadline.

In an official statement, the bank confirmed that its public offer was 160.47% subscribed, distributing ₦4.4 billion, while its rights issue achieved a 100.18% subscription rate, allocating 5.2 billion ordinary shares. The overwhelming participation underscores strong investor confidence, both locally and internationally.

Banking Sector Outlook: Consolidation and Stability

The recapitalisation initiative aligns with S&P Global’s assessment that most rated banks in Nigeria will successfully meet capital issuance targets by the end of 2025. The firm predicts that the sector-wide capital exercise will have a positive impact, improving banks’ loss-absorption capacity and overall financial stability.

While the CBN maintains that the policy is designed to strengthen financial institutions, ensure regulatory compliance, and enhance risk management, analysts warn that not all banks will withstand the pressures of the new capital regime. Mergers and acquisitions may become a necessity for smaller institutions unable to independently meet the new requirements.

As Nigeria’s financial landscape undergoes this regulatory shift, the coming years will likely see a more consolidated, capital-efficient, and resilient banking system, reinforcing investor confidence and fostering long-term economic stability.