nto meaningful lending to businesses, especially those that drive employment and growth? Data released by the Central Bank of Nigeria (CBN) indicates that 33 banks met the new capital requirements by the March 31, 2026, deadline, collectively raising about N4.65 trillion through rights issues, public offers, and private placements. Notably, over 70 percent of this capital was sourced domestically, reflecting some confidence in the local financial system despite prevailing macroeconomic pressures.

A small number of institutions remain within regulatory or judicial processes, but system-wide stability does not appear threatened. Recapitalisation, however, is only a means to an end. The real purpose of a stronger banking system is financial intermediation—mobilising savings and efficiently allocating them to productive sectors of the economy.

In Nigeria, that objective has historically been only partially achieved. Banks have often preferred low-risk, high-yield opportunities such as government securities and foreign exchange trading, rather than lending to the real sector, where risks are higher and structural bottlenecks persist. The new framework introduces a more explicitly tiered system.

Banks are now categorised into international, national, and regional commercial banks, alongside merchant and non-interest banks, each with distinct capital thresholds. International banks require N500 billion, national banks N200 billion, and regional banks N50 billion, while merchant banks also sit at N50 billion and non-interest banks between N10 billion and N20 billion. In theory, this segmentation should improve efficiency by aligning bank capacity with the scale of financing needs.

Large banks would focus on funding major infrastructure and corporates, while smaller institutions would serve SMEs and local economies. Yet, the concern is that segmentation alone does not guarantee credit flow. If anything, it risks reinforcing an existing structural bias.

Larger banks, now even more capitalised, may deepen their focus on top-tier clients—oil and gas firms, multinationals, and government-linked projects—where returns are more predictable. Meanwhile, smaller banks, though closer to SMEs, often lack the balance sheet strength and risk appetite to scale lending meaningfully. The result could be a system that is stronger on paper but still fragmented in practice.

This concern is not theoretical. Nigeria’s credit to the private sector remains relatively low as a share of GDP compared to peer economies. High interest rates, inflationary pressures, exchange rate volatility, and weak contract enforcement all combine to raise the cost of lending.

For many banks, preserving asset quality remains a more immediate priority than expanding loan books aggressively. Recapitalisation may strengthen capacity, but it does not eliminate these underlying risks. The 2004–2005 consolidation exercise, which raised the minimum capital to N25 billion, created larger and more resilient banks.

However, the expected surge in real-sector lending was uneven and, in some cases, misallocated, which contributed to asset bubbles and, eventually, the banking crisis that followed in 2009. The lesson is that size alone does not guarantee productive intermediation; governance, risk management, and regulatory oversight matter just as much. Globally, successful economic transformations have often been underpinned by deliberate credit allocation strategies.

East Asian economies, for example, combined strong banking systems with policy direction that channelled finance into manufacturing, exports, and small enterprises. Similarly, microfinance innovations, such as those pioneered by the Grameen model in Bangladesh, demonstrate how targeted lending can unlock grassroots economic activity. Nigeria’s challenge is to adapt these lessons within its own institutional realities.

For this recapitalisation to deliver real impact, Daily Trust believes that complementary reforms are essential. First, regulatory incentives must align with development objectives. This could include differentiated capital requirements or credit guarantees for SME lending, as well as stricter limits on banks’ exposure to risk-free government instruments.

Second, credit infrastructure must improve: stronger collateral registries, more reliable credit bureaus, and faster judicial processes for loan recovery. Without these, banks will continue to price risk conservatively or avoid it altogether. Third, the emerging “mezzanine layer” within the banking system—mid-tier institutions positioned between large