- Fitch says Nigeria’s banking sector recapitalisation model and scale stand out among Sub-Saharan African peers
- It compared bank recapitalisation across SSA countries, saying Nigeria’s aggressive capital reform is the most consequential on the continent
- Fitch said the recapitalisation drive will fuel economic growth, credit expansion, and buffer vulnerabilities in the banking sector across SSA countries
Fitch Ratings says Nigeria’s banking sector recapitalisation stands out among sub-Saharan Africa (SSA) peers in terms of business model differentiation and scale.
The rating agency, in its ‘Sub-Saharan African Banks’ New Paid-In Capital Rules’ report, said Nigeria’s aggressive capital reforms are the most consequential on the continent.
It noted that while several SSA regulators have raised minimum capital requirements in response to post-pandemic economic volatility, Nigeria’s approach stands apart in scale, speed, and structural impact.
Recall that the Central Bank of Nigeria (CBN), in March 2024, introduced a recapitalisation policy, which requires commercial banks with international authorisation to raise their capital base to a minimum of N500 billion from N50 billion.
Banks with national authorisation will raise theirs to N200 billion from N25 billion, while those with regional authorisation are required to reach a N50 billion threshold from N10 billion.
Merchant banks with national authorisation will have to increase their capital base to N50 billion from N15 billion previously, non-interest banks with national authorisation are expected to increase theirs to N20 billion from N10 billion, while non-interest banks with regional authorisation will raise their capital base to N10 billion from N5 billion.
The minimum capital base requirements for Nigerian banks are the highest among SSA markets, where most regulators have opted for more moderate increases and longer implementation timelines.
Fitch Ratings stated, “Nigeria’s new requirements stand out from those of other markets in terms of business model differentiation and scale.”
Bank recapitalisation comparison across Sub-Saharan African countries
The bank recapitalisation policy for Nigerian banks prohibits the use of retained earnings, requiring banks to raise fresh equity, merge, or downgrade their licence to comply by March 2026.
This is unlike Kenya, Burundi, and Sierra Leone, where retained earnings are permitted and full compliance is expected by 2029.
Fitch’s report shows that in Kenya, capital requirements increased by up to 10x, but many large banks were already compliant. Retained earnings are allowed, and full implementation is scheduled for 2029.
In Burundi and Sierra Leone, there were moderate increases in capital requirements of up to 5x, phased over several years, and banks can build capital internally through profits.
Requirements increased by up to 3x in the WAEMU countries, with full compliance expected by the end of 2026.
Angola and Uganda have shorter recapitalisation timelines. While banks in Angola have just 12 months, those in Uganda have their deadline set for mid-2024.
In contrast, Nigeria’s reforms apply uniformly and urgently across all banks, regardless of size or profitability.
Fitch notes that “all Nigerian banks have to raise capital,” highlighting the uniform and urgent application of the recapitalisation policy irrespective of size or profitability, which is not the case with other SSA markets, where many institutions were already compliant.
Recapitalisation to fuel economic growth, credit expansion, buffer sector vulnerabilities
Fitch’s report, like others, notes the enormous benefits of the recapitalisation drive to the region’s economy, through credit expansion, and serving as a buffer to vulnerabilities in the banking sector.
With most tier-1 and tier-2 Nigerian banks meeting the new capital base thresholds without triggering widespread consolidation in the sector is a demonstration of huge investor appetite in banking stocks in the region.
Credit growth is expected across SSA, driven by recapitalisation, as banking sector loans average below 20 per cent of Gross Domestic Product (GDP).
In this regard, Fitch forecasts real GDP growth in SSA to move from 3.5 per cent (2019–2024 average) to 4.2 per cent in 2025 and 4.3 per cent in 2026.
In the case of Nigeria, the fresh capital needed to meet the new requirements amounts to 1.1 per cent of GDP.
The CBN has often maintained that the reform is linked to broader economic development goals, aiming to reduce credit concentration risks and support larger-scale lending.
Fitch corroborates this view, saying, “Higher absolute capital requirements will provide banks with fuel for credit growth and enable them to finance larger projects within the confines of their single-obligator limits.”
The recapitalisation also aims to strengthen banks’ ability to absorb losses from high-risk exposures.
In Nigeria, banks are grappling with challenges in provisioning for underperforming loans from oil and gas businesses, while Kenyan banks are faced with high impaired loan ratios due to unpaid government contractor bills.
Among its SSA peers, Fitch notes that Nigeria’s recapitalisation strategy is not only the most ambitious, but also the most transformative, positioning the country’s banking sector for stronger resilience and growth in the years ahead.
Fitch says Nigerian banks are on track to meet 2026 recapitalisation deadline
Meanwhile, TheRadar earlier reported that International rating agency, Fitch Ratings, said Nigerian banks are on track to meet the March 2026 recapitalisation deadline set by the Central Bank of Nigeria (CBN).
Fitch disclosed this in a non-rating commentary issued by the firm on Nigerian banks on Wednesday, February 12, via its website.
