In fact, one of the headlines and news reports that had a salutary and appreciative effect on his presidency was his ability to overhaul the Nigerian banking sector through the introduction of a comprehensive and far-reaching set of reforms.
In March 2024, the Central Bank of Nigeria announced fresh recapitalisation requirements for banks in the country. The CBN, in the circular announcing the new recapitalisation drive, raised the minimum capital base for all commercial, merchant and non-interest banks. All banks are required to meet the minimum capital requirement within 24 months commencing from April 1, 2024, and terminating on March 31, 2026.
The apex Bank pegged the minimum capital base for commercial banks with international authorisation at N500 billion from N50 billion in 2005. It also benchmarked the minimum capital requirement for banks, categorised by National Spread (N200 billion), Regional (N50 billion), Merchant Banks (N50 billion), National Non-Interest Banks (N20 billion), and Regional Non-interest (N10 billion).
This is not the first time the Nigerian government, through the CBN, has raised the minimum capital base for banks in the country. The first recapitalisation in the banking sector happened under the administration of former president Olusegun Obasanjo. It started in 2004 and was completed in 2005. In fact, one of the headlines and news reports that had a salutary and appreciative effect on his presidency was his ability to overhaul the Nigerian banking sector through the introduction of a raft of comprehensive and far-reaching reforms. These radical and progressive reforms not only stabilised the banking sector but also strengthened it, which undoubtedly contributed significantly to the economic growth recorded under him.
Before the CBN’s 2005 recapitalisation, spearheaded by Charles Soludo, the governor of the apex bank at the time, the Nigerian banking sector was a chaotic mess, with many banks failing to meet expectations. Aside from the obvious capital inadequacy of the banks, weak and obsolete banking infrastructure, corporate governance was almost non-existent, corruption and fraud were rife and public trust and confidence in the banking system was at an all-time low. To address these challenges, Soludo raised the minimum capital requirement for banks to N25 billion from N2 billion before 2004. The banks at the time were given a deadline of 2005 to meet the requirements.
Many observers at the time deemed Soludo’s reforms audacious, over-ambitious and unrealistic. However, despite the misgivings and pessimism of cynics, despite the pushback and vehement opposition that his radical policy faced from entrenched vested interests who had held the banking sector down for years and were profiting from the impunity, rot and dysfunction that plagued the sector, Soludo stuck to his guns and was able to push through with the recapitalisation requirements. In the end, those who considered his reforms foolhardy would later hail him for transforming the Nigerian banking sector.
Before the reform, Nigeria had 89 banks, many of which were small and inefficient and were plagued by corruption and mismanagement. By the time the deadline for the minimum capital base of N25 billion had elapsed in 2005, the number of banks had shrunk to 25 as mergers and acquisitions of those that could not meet the recapitalisation requirements took place. The changes spurred by the reform were positive and could be seen in the upward trajectory of the economy at the time. Growth in the non-oil sector of the economy outpaced the 7.4% of the overall economy in 2005 by growing at 8.5% while lending to the private sector rose by 40% in 2005. Such achievements cannot be underestimated and the positive repercussions of the banking reforms could yet herald a transformation of Nigeria’s economy.
But here we are 20 years later and another recapitalisation is being initiated by the apex Bank under the President Bola Tinubu administration. However, the times are different now. The conditions and circumstances that necessitated the banking reforms of the Soludo era are not the same as the ones that informed the decision of the CBN under Olayemi Cardoso to change the minimum capital base for banks now. Nigeria’s banking system has come a long way since that much-needed cleansing and revolution engendered by Soludo’s audacious and impactful reform programmes. The banks are healthier, stronger, more efficient and innovative now. Depositors are no longer overwhelmed by the crippling fear of losing their funds in the bank, an occurrence that was rampant before the reforms of Soludo. Many banks now have a loyal customer base and are on a sound financial footing.
Be that as it may, Cardoso’s recapitalisation requirements are proving to be too steep a mountain to climb for some banks. On Tuesday the CBN announced that only fourteen banks are yet to meet the minimum capital base required for their category of banking. The CBN governor, Cardoso, had in a statement on Tuesday after the bank’s 303rd Monetary Policy Committee in Abuja, disclosed that only sixteen banks have met the recapitalisation requirements. CBN records as of 2024 showed that the country has thirteen commercial banks, five merchant banks and seven financial holdings companies.
The substantial progress in the ongoing recapitalisation programme is a testament to how far the Nigerian banking sector has come and how solid the financial ecosystem and value chain are. It is also an indication that the Nigerian banking sector is strong enough to withstand any domestic and external macroeconomic challenges and shocks and continue to contribute to the growth of the Nigerian economy.
With sixteen banks already achieving full compliance with the revised capital requirements, we are unlikely to see a significant reduction in the number of existing banks due to the inability to meet the recapitalisation requirements which would then lead to the merger of some with others and the acquisition of others by bigger and stronger banks as was the case in 2005. However, with the March 2026 deadline fast approaching and with some banks still scrambling to meet the new minimum capital base, we can’t rule out the emergence of new banks that will be born by fresh mergers and acquisitions.
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