The recapitalization policy mandates banks with international licenses to meet a minimum capital of N500 billion from the N50 billion previously, N200 billion for national banks from N25 billion, and N50 billion for regional banks from N10 billion. 

With the deadline of March 31, 2026,  and less than 293 days to the deadline, the directive has paved the way for a transformative shift in the banking sector, raising critical questions about the survival of small banks and the implications on the Nigerian financial landscape.

While some tier 2 and tier 3 banks are yet to make any large movements towards meeting the capital threshold, some tier 1 banks like Zenith Bank Plc which raised N290 billion through a combined rights issue and public offer, which brought its total capital to N614.65 billion, surpassing the N500 billion benchmark, and Access Bank Plc has also met the CBN threshold.

Bank Executives Betting Big on their institutions

As the deadline draws closer, a notable trend has surfaced in the financial sector with bank executives and insiders buying large quantities of their banks’ shares.

This reflects growing confidence in their institutions’ future performance enough to back them financially which can also convince other investors to invest.

Recently, Tony Elumelu, chairman of the United Bank for Africa purchased 45 million shares worth N1.54 billion between May 22 and 23, 2025, and within a week later, he bought an additional share worth N43.9 billion between May 29 and 30, while encouraging other shareholders to invest their dividends in the company.

By investing their capital, executives demonstrate belief in their banks’ growth, which can also attract retail and institutional investors.

Strategies for Survival

To survive, tier 2 and tier 3 banks must adopt a strategy if they wish to remain in the Nigerian banking sector. The options for banks that will survive have been defined; to survive, you either raise capital, merge, or downgrade your operational license.

• Capital Raising: For tier 2 and tier 3 banks to survive, they need to meet the capital threshold set by the CBN to remain a player in the Nigerian financial sector. They can explore options such as raising capital through rights issues, private placements by targeting private equity investors, or public offers.

• Mergers and Acquisition: Tier 2 and tier 3 banks can decide to merge to share the burdens, as the banks combine resources to meet the requirements. However, mergers are expected to take place in the banking sector, just like what occurred during the 2004 recapitalization exercise, which reduced the number of banks from 89 to 25. A similar occurrence might take place, reducing the available options available to consumers

• License Downgrades: The CBN capital recapitalization policy gives room for institutions that are unable to meet the capital threshold to relinquish their license. For an international or national bank that cannot meet the capital requirement before the deadline, the bank can step down its operation to become a regional bank, thereby reducing its capital obligation.

Will small banks survive or become casualties of a transforming financial system?

Tier 2 and tier 3 banks’ survival relies on their ability to innovate and adapt to the changing banking sector.

Some banks may leverage partnerships, mergers, and acquisitions to boost their financial standing. Others might decide to downgrade their operations focusing on underserved markets to stay relevant post-recapitalization exercise.

Tier 2 and tier 3 banks face steep competition from bigger players in the sector, as investor confidence in smaller institutions remains shaky. While some banks may face becoming stronger and more competitive, others might have to take the hard route of downgrading their license or exiting the market.

The fate of small banks will largely be driven by the ability to innovate, adapt, and align their strategies with regulatory requirements and market demands.

This caution was delivered during the 36th Seminar for Finance Correspondents and Business Editors, held on Monday in Abuja. The apex bank said stringent verification processes are in place to prevent dirty money from destabilising the country’s banking system.

Dr. Olubukola Akinwunmi, director of Banking Supervision at the CBN, advised financial institutions to explore legitimate and flexible capital-raising channels, including initial public offerings (IPOs), rights issues, private placements, mergers and acquisitions, and strategic foreign investments.

He noted that banks can also modify their operational scope—such as transitioning from international to commercial status—without weakening capacity, so long as they comply with regulatory expectations.

As part of the recapitalisation roadmap, the CBN has set new minimum capital thresholds:

• International commercial banks must raise at least ₦500 billion
• National commercial banks must secure ₦200 billion
• Regional commercial banks and merchant banks are required to have a minimum of ₦50 billion
• National non-interest banks must raise ₦20 billion, while regional non-interest banks need ₦10 billion

In her keynote address, Emem Usoro, CBN deputy governor noted the strategic importance of the recapitalisation effort in achieving financial system stability and advancing Nigeria’s global economic ambitions.

“As we aspire to build a global $1 trillion economy, all hands must be on deck,” Usoro said. “We must prioritise recapitalising our banks to effectively power and finance the economy, and to remain competitive with peers across the globe.”

The recapitalisation exercise commenced on April 1, 2024, and will span 24 months. It forms part of the Federal Government’s initiative to fortify the banking sector against both domestic and global shocks while positioning it to support Nigeria’s long-term economic growth targets.

According to Toye Eniola, the executive secretary of the Association of Housing Corporations of Nigeria, “The prices of building materials and construction have gone up and more funds would be required in the system. Recapitalization will assist FMBN in creating adequate and more mortgages to service affordable housing provision and create a vibrant mortgage market in Nigeria

He said:

“FMBN loan is a single digit of six percent interest and recapitalization will not make any difference because it is a special loan backed by law and would only be changed by the same law that established it. However, recapitalization of FMBN cannot guarantee a single-digit interest rate in the general mortgage market because of the monetary policy and capital market forces dictated by government lending rates and where mortgage institutions are sourcing their funding.”

However, recapitalization of FMBN cannot guarantee a single-digit interest rate in the general mortgage market because of the monetary policy and capital market forces dictated by government lending rates and where mortgage institutions are sourcing their funding.”

Meanwhile, another expert in the field has advanced the fact that recapitalizing FMBN was one of the steps necessary to achieve affordable housing in Nigeria.

He noted that “Since the current administration is determined to provide affordable homes to Nigerians, it can revisit and change the law and policy to recapitalize FMBN and make it a solvent institution that can help the masses. Recapitalising FMBN is one of the steps necessary to achieve affordable housing in Nigeria.

“Recapitalizing FMBN is not going to guarantee a single-digit loan across the board in Nigeria but will create an opportunity for competition that would make the double-digit lenders seat up. Look at the recent case of Air Peace. Did you see how the airlines were cutting their prices? Competition creates an atmosphere where everyone would give their best, which ultimately might benefit the consumers, who are the ordinary Nigerians.”

Abiru said this on Saturday at the committee’s retreat with the Nigeria Deposit Insurance Corporation in Lagos State.

He said, “It goes without saying that the financial sector requires to be continuously strengthened to be able to perform its role of intermediating between surplus and deficit units in the economy.

“It is in this light that I welcome the plan by the Central Bank of Nigeria to recapitalize the banks. In doing so, the CBN will be well-advised to engage all critical stakeholders including the National Assembly

“As a corollary, the country’s financial sector should be under the constant watch of regulators as well as regularly subjected to effective oversight by the National Assembly if it must remain resilient and continue to command the confidence of the public.”

Speaking on the essence of the retreat, he said, “The essence is for better understanding and deepening of the role of the deposit insurance business being led by the NDIC.

“Also, we have seen that the banks in Nigeria have been resilient, despite the evidence that we see on the global stage and even on the national stage. We are very mindful locally here of the serious depreciation in the value of our currency. Of course, you know that has an impact on the balance sheets of the banks, to that extent the role of the NDIC is very important.

“Yes, we know that the ratios of the banks are very good today. We have also heard that the CBN is about to recapitalize the banks, which means that we as legislators, must understand the role that the regulators are playing. That is one of the essence of why we are here.”

Lending credence to his view, Bello Hassan, the managing director/Chief Executive, of NDIC,  In his welcome address at the retreat,  said the retreat would enable a mutual working relationship between the legislature and the corporation.

“It is to this end, that the theme of the retreat and the papers to be delivered, were carefully selected, to create the right ambience for robust interactions and experience sharing during the exercise.

“As you are aware, the Deposit Insurance System is an important component of the financial safety net, and plays a crucial and indispensable role in the attainment of financial system stability. In Nigeria, the effective discharge of the corporation’s mandate since its establishment about 35 years ago, has gone a long way in engendering public confidence in our banking system, while also providing strong support to the monetary authority in the formulation and implementation of sound banking policies,” Hassan said.

He added that a robust legal framework is at the heart of an effective Deposit Insurance System in any jurisdiction.

“It is against this backdrop, that Principle 2 of the International Association of Deposit Insurers Core Principles for Effective Deposit Insurance, harps on the powers of a Deposit Insurer (DI). It underscores the necessity for a DI to have all powers necessary to fulfill its mandate and further emphasizes that these powers should be formally specified in enabling legislation.

“The above, and the benefits of sound oversight, have combined to underscore the significance of the legislature to the Corporation and the importance of the harmonious working relationship between the two, in the interest of the banking system in particular and the economy in general,” he concluded.

The NDIC is the agency empowered to protect depositors of deposit-taking financial institutions.

It provides incentives for sound risk management in the Nigerian banking system as well as contributes to the stability of the financial system.