Nigerian Banks Face Another Test After Recapitalisation as CBN Announces Deadline for Stress Report
- The CBN has directed banks to submit risk-based capital stress test reports by April 30, 2026
- The new framework shifts focus from capital size to capital resilience under adverse conditions
- Analysts say the stress test will assess the true strength of banks’ capital after recapitalisation
Oluwatobi Odeyinka is a business editor at Legit.ng, covering energy, the money market, technology and macroeconomic trends in Nigeria.
Nigeria’s banking sector is facing tighter regulatory scrutiny as the Central Bank of Nigeria (CBN) has set an April 30 deadline for lenders to submit Board-approved Risk-Based Capital (RBC) stress test reports.
The directive, issued on March 6, 2026, requires banks to evaluate how their capital positions would perform under adverse credit conditions, signalling a shift from focusing on capital size to assessing its resilience.
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CBN explains purpose of new directive
In a joint statement signed by Olubukola Akinwunmi and Hakama Sidi Ali, the apex bank said the policy is designed to safeguard gains from the recent recapitalisation exercise.
The CBN noted that it has strengthened its capital adequacy framework by mandating regular stress testing across defined scenarios, alongside maintaining sufficient capital buffers.
According to the regulator, the framework will be supported by periodic reviews of prudential guidelines and supervisory processes to improve governance, risk management, and overall sector stability.
The RBC regime expands provisions under the Banks and Other Financial Institutions Act 2020 and complements the 2019 stress testing guidelines.
It also extends detailed risk assessments to cover both on-balance sheet and off-balance sheet credit exposures across the banking system.
Analysts highlight focus on capital quality
While the March 31 recapitalisation exercise centred on meeting minimum capital thresholds, analysts say the new directive goes further by examining the strength of that capital.
According to PUNCH, a report by DataPro described the stress test as an “ultimate filter” for the recapitalisation programme, warning that strong capital figures alone may not guarantee stability if asset quality weakens.
The framework includes a 12-month simulated stress scenario to determine whether banks can absorb potential defaults without breaching regulatory capital adequacy ratios.
Banking sector remains stable, CBN says
The CBN confirmed that 33 banks have met the revised minimum capital requirements, while a few others are still undergoing regulatory and judicial processes.
It added that all banks remain operational and continue to maintain capital adequacy ratios above international Basel Committee on Banking Supervision benchmarks.
Minimum capital adequacy thresholds are set at 10% for regional and national banks and 15% for internationally licensed lenders.
Possible capital gaps may emerge
Despite the progress recorded during recapitalisation, analysts warn that stress testing could reveal fresh capital shortfalls.
DataPro noted that meeting capital thresholds does not necessarily ensure financial resilience, as the RBC framework evaluates how well capital can absorb losses under realistic economic stress conditions.
Where gaps are identified, banks will be required to raise additional capital under what DataPro described as the “Higher of 50/100” rule.
This means lenders must meet either 100% of their internally reported stressed shortfall or 50% of the shortfall calculated by the CBN, whichever is higher.
Compliance timeline and oversight measures
Banks will be given an 18-month window to address any capital gaps identified during the stress tests.
Institutions with deficiencies will face closer monitoring, including follow-up stress tests within six months, while compliant banks will continue on a 12-month testing cycle.
Industry players say implementation is already underway. Ayokunle Olubunmi, head of Financial Institutions Ratings at Agusto & Co, said most banks have begun compliance ahead of the April timeline.
The framework also introduces new provisions for sectors considered high-risk, including manufacturing and agriculture.
Under the directive, banks are required to maintain a 10% provisioning floor for exposures in these sectors to cushion against economic shocks such as foreign exchange volatility and commodity price fluctuations.
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CBN pushes for stronger banking system
The CBN said the recapitalisation programme, combined with the phased exit from regulatory forbearance, has improved asset quality and strengthened balance sheet transparency.
The tougher regulatory stance aligns with Nigeria’s broader economic ambition of building a resilient banking system capable of supporting large-scale infrastructure and industrial financing.
With the RBC framework taking effect from April 1, regulators have made it clear that banks must now demonstrate the durability of their capital under stress conditions.
CBN directs IMPOs to open naira settlement accounts
Legit.ng earlier reported that the CBN has directed International Money Transfer Operators (IMTOs) to open Naira settlement accounts with authorised dealer banks.
All remittance-related transactions must now be processed through these designated accounts.
The policy aims to improve transparency, monitoring, and efficiency in the foreign exchange market.
Source: Legit.ng
