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Following the successful conclusion of the banking sector recapitalisation exercise, the Central Bank of Nigeria – CBN has transitioned into a new regulatory phase characterized by a strengthened risk-management regime and mandatory stress testing to ensure long-term financial stability.

It has officially moved from capital raising to a more rigorous phase of regulatory oversight designed to safeguard the gains of the recent recapitalisation programme.

Dr. Olubukola Akinwunmi, the CBN’s Director of Banking Sector Supervision, revealed that the apex bank has reinforced its risk-based capital adequacy framework.

This new mandate requires deposit money banks to conduct periodic stress tests under various adverse scenarios, ensuring they maintain sufficient capital buffers to absorb potential macroeconomic or sector-specific shocks without collapsing.

A central component of this proactive strategy is the requirement for banks to model scenarios involving the gradual deterioration of their loan books. By simulating domestic and external shocks that could affect the repayment ability of businesses and households, banks are expected to identify capital gaps early.

This allows for proactive planning—either by raising fresh capital immediately or restructuring loan portfolios—to ensure that risk exposure never exceeds available capital. The goal is to avoid the historical cycles of asset quality decay that have previously plagued the industry.

In a move to curb corporate governance abuses, the CBN has introduced a stringent directive requiring banks to make 100% provisions for all insider-related loans, regardless of whether they are performing or non-performing.

Analysts suggest this measure is specifically designed to enforce discipline in credit allocation and prevent the misuse of depositors’ funds for related-party transactions. By enforcing such strict provisioning, the regulator aims to ensure that the newly raised capital is utilized for economic expansion rather than being swallowed by existing or potential bad debts.

Financial experts, including representatives from Agusto & Co and DataPro, indicate that most banks are already finalizing their stress test submissions. The outcomes of these tests will serve as individual capital requirements for each bank until the next supervisory cycle.

While many banks have met the initial recapitalisation targets, the focus is now shifting toward the efficient deployment of this capital. Experts anticipate that the increased scale will lead to more banks returning to the market in the coming years to remain competitive as the industry supports Nigeria’s ambition of a $1 trillion economy.

Ultimately, this transition signals a shift toward a more sophisticated, risk-based capital regulation model in the Nigerian banking sector. Beyond just having large sums of money, the CBN is ensuring that banks possess the institutional resilience to support emerging sectors and withstand “worst-case” economic downturns.

As banks begin to deploy their strengthened balance sheets, the industry is expected to pivot toward supporting previously underserved sectors, marking a new era of growth and stability for the country’s financial landscape.