CBN to Tighten Bank Supervision as Recapitalisation Ends
…Regulator Wants Better Governance, Risk Control and Cyber Safety
By Patience Ikpeme
The Central Bank of Nigeria (CBN) has said it will watch banks more closely in the coming months, as the industry moves into a new stage after the end of the two-year recapitalisation exercise.
The regulator said it will pay closer attention to how banks are run, the quality of their loans, their cash position, the size of their exposure to single borrowers, and their ability to keep working when hit by system failures or cyber attacks.
The recapitalisation exercise ended with 33 banks meeting the new minimum capital levels, raising about ₦4.65 trillion between them. But the CBN told banks that raising money was only the first step. What matters now, it said, is how safely the money is kept and how wisely it is used.
Dr. Muhammad Sani Abdullahi, the CBN’s Deputy Governor in charge of Corporate Services, spoke on Tuesday in Abuja at the 38th Seminar for Finance Correspondents and Business Editors. He said the industry must now shift from the race to raise funds to the duty of protecting and using the funds responsibly.
“Capital, however, is a starting point. Boards and management must maintain sound controls, recognise risks early and lend on the strength of viable projects,” he said.
He said bank boards and managers must act with honesty, openness and accountability, and must avoid taking reckless risks. Their decisions, he added, must protect depositors, investors and other stakeholders. He also said banks must guard customers’ data, keep payment services running smoothly, and recover quickly when their systems break down.
According to the CBN, risk management can no longer stop at the danger of borrowers failing to repay. Banks must also prepare for market shocks, cash shortages, operational failures, cyber threats, reliance on outside service providers and risks linked to climate change. Dr. Abdullahi said banks need systems that spot such dangers early, so that managers can act before an entire bank is put at risk.
“As more financial services move to digital channels, banks must invest continuously in cybersecurity, data protection, disaster recovery and business continuity,” he said. He added that customers must be able to make transactions safely and reach their money even when a bank faces technical problems.
The apex bank said its supervision will continue to be based on the level of risk each bank carries, and will also include watching the wider financial system and testing how banks would cope in hard times.
Recapitalisation goals
The recapitalisation programme was announced in March 2024, and banks were given two years to raise capital suited to the type of licence they hold. Dr. Abdullahi said the aim was to make banks strong enough to support the economy as other financial and monetary reforms take effect.
He said the banks are now expected to lend more to infrastructure, industry, international trade and other productive areas, in support of Nigeria’s goal of building a $1 trillion economy by 2030. However, he said success should not be judged by the amount of money raised, but by better banking services and more productive lending to businesses and households.
“Agriculture, manufacturing, services and infrastructure need finance suited to their cash flows and investment horizons,” he said.
The CBN also wants small businesses and households to enjoy reliable payment systems, suitable financial products and fair treatment. It further wants the gains from stronger banks to reach rural communities, women and young entrepreneurs, describing financial inclusion and consumer protection as key parts of a strong financial system.
Business owners were not left out. The CBN urged them to be more open in their dealings and to improve their governance and sustainability practices, since banks now look at these factors when deciding who to lend to. Dr. Abdullahi said companies must be ready to put fresh bank financing to good use in areas such as technology, energy, transport, power, agriculture and manufacturing.
Governance and insider lending
The Director of Banking Supervision at the CBN, Dr. Olubukola Akinwunmi, said recapitalisation should be seen as the beginning of a new phase of reform, not the end of it. He warned that a bank may have enough capital and still be in trouble because of poor governance, weak risk control, bad loans, cash pressure, operational lapses, cyber threats or reckless risk-taking. For this reason, he said, capital alone cannot guarantee that a bank will survive shocks.
Dr. Akinwunmi said poor governance can set off a chain of problems. It often starts with bad lending decisions, leads to loans going bad and a loss of public confidence, and ends with cash shortages and losses that eat into a bank’s capital.
He also spoke about insider lending, which the CBN is watching closely. He pointed to the insider-credit circular issued in February 2025, saying it was meant to stop deals involving insiders from creating risks that could weaken banks.
The regulator’s governance rules rest on its 2023 guidelines, which took effect on August 1, 2023. They cover commercial banks, merchant banks, non-interest banks, payment service banks and financial holding companies. The rules set out standards on the make-up and independence of boards, risk oversight, internal controls, ethical behaviour, and the duties of directors and senior managers.
The CBN is also looking more carefully at who is appointed to senior positions in banks. Dr. Akinwunmi said the quality of such officials matters because their decisions can determine whether a bank stays healthy. Weak appointments, he said, could lead to poor risk management, wrong lending choices and the loss of shareholders’ and depositors’ funds.
New capital rules and stress tests
Under the risk-based capital framework issued in March 2026, banks must hold capital that matches the risks in their own businesses. This means the capital required of one bank may differ from that of another. Banks with heavy concentration of loans, large foreign exchange exposure, governance weaknesses or complex operations will be expected to keep bigger buffers. The idea is that banks should hold not just more capital, but enough for the risks they take.
The CBN is also using stress tests to see how banks would fare in bad times. The tests cover high inflation, a falling naira, recession, rising interest rates, more loan defaults, cyber attacks and market disruptions. The goal is to find weak points early and confirm that banks have enough capital, cash and risk systems to survive severe but possible shocks.
End of regulatory relief
Dr. Akinwunmi said the CBN is moving away from the long-running regulatory forbearance introduced during periods of severe economic stress. He said the relief helped protect financial stability and kept credit flowing in hard times, but was never meant to be permanent. Withdrawing it will force banks to admit bad loans quickly, hold adequate capital and give a truer picture of their finances.
The CBN said the return to normal prudential standards, together with recapitalisation, stronger governance and risk-based supervision, would help build a banking system better prepared for future shocks.
