Nigeria’s banking sector has entered a new phase as the recapitalisation deadline set by the Central Bank of Nigeria takes effect. The exercise required lenders to raise fresh capital to meet revised minimum thresholds, including ₦500 billion for international banks, alongside lower requirements for national and regional institutions.

Most of the country’s largest banks met these thresholds within the regulatory timeline, reinforcing their position at the centre of Nigeria’s financial system. These institutions account for a significant share of industry assets and lending, placing them at the core of credit creation and economic activity.

From capital levels to rising credit pressure

With the capital phase largely completed, the focus has shifted to what sits beneath those balance sheets. From April 2026, banks are required to test how well their capital can hold up if loans begin to fail across key sectors.

That question is becoming more urgent because credit in the system has expanded sharply. Data from the Central Bank shows that total credit to the economy moved from about ₦51.5 trillion in 2024 to more than ₦75 trillion by early 2026. The demand for loans has not slowed, even as lending conditions tightened in parts of 2025.

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But the quality of that credit is beginning to show strain. The non-performing loan ratio rose from about 4.5 percent in 2024 to around 7 percent in 2025, and is expected to remain elevated through 2026. In simple terms, most borrowers are still repaying, but the margin of safety is getting thinner.

Risk analysts at DataPro Limited have pointed to the need for closer scrutiny of loan portfolios, especially in sectors where exposure is already high. For banks, this means setting aside more money to cover potential losses, a move that directly affects profits and gradually eats into capital buffers.

The pressure is even more pronounced for large banks. Their dominance in lending means they carry a bigger share of the risk, particularly in sectors such as oil and gas, infrastructure and telecommunications, where shocks tend to spread quickly across balance sheets.

Capital pressure and what comes next

The outcome of the new stress tests will determine how solid current capital levels really are. Where gaps are identified, banks may be required to raise additional capital within a defined period, extending the recapitalisation cycle beyond its official close.

This shifts the conversation away from how much capital was raised to how well that capital can absorb shocks. It also places more weight on how banks manage risk, from loan monitoring to sector exposure and overall balance sheet discipline.

The direction is clear. As Nigeria pushes toward a larger economy, the banking system is expected to support more lending without taking on excessive risk. The test now is whether banks can keep that balance.

What comes next will not be defined by capital alone, but by how much of it can survive the realities inside the loan book.

Meiza Nigeria