Nigerian Banks Urged To Channel N4.65trn Capital Into Productive Sectors

Findings show that pressure is now mounting on banks to make better use of their profits ahead of the next earnings season, after two years of chasing new funds, navigating tough regulations and pitching to investors.

With the recapitalisation exercise led by the Central Bank of Nigeria (CBN) now over, banks have raised a total of N4.65 trillion to meet new capital requirements. While this has made the sector stronger and increased their financial capacity, the focus now is on how well the money will be deployed to create real growth.
But it has also changed expectations as the urgency for banks to survive has diminished. But there is a sharper question coming from shareholders who funded the expansion. Now they are asking for evidence that bigger banks can convert their larger capital bases into stronger, more consistent earnings and not just compliance comfort.

33 banks met the new regulatory thresholds, the apex bank said. Heritage Bank was the only major casualty after failing to improve its financial condition despite regulatory intervention, it was learnt.

Shareholders are about to smile home with N27 trillion, a huge jump from N21.97 trillion in 2024. However, they are worried that investors cannot eat announcements.

Chika Mbah, a retail investor who took part in the rights issues of both Fidelity Bank and Access Holdings said: “The capital raise was needed but investors can’t survive on announcements forever. People want to see stronger dividends, steady earnings and share-price appreciation even in the next earning season.”

The recapitalisation exercise fundamentally altered the size of Nigerian banks. These larger shareholders’ funds will enable banks to take bigger transactions in infrastructure, energy, manufacturing and regional trade finance.

Under the present prudential guidelines, banks can lend up to 20 per cent of shareholders’ funds to one borrower. The expanded capital base now places leading lenders in a position to anchor billion naira infrastructure transactions that were previously out of reach, analysts say.

They also caution that raising capital and deploying it profitably are entirely different challenges. Explaining the development, Managing Director, Optimus by Afrinvest, Ayodeji Ebo, said the sector has moved from a solvency story to an execution story. “Banks which can efficiently put capital to work in quality assets will maintain returns. Those that just sit on excess liquidity may see pressure on return on equity over the next few years,” Ebo said.

The end of CBN’s regulatory forbearance in 2025 compelled lenders to recognise impaired loans that had been temporarily shielded, especially in the oil and gas sector. Meanwhile, higher interest rates have raised repayment pressure on corporate borrowers.

Several banks already flagged weaker 2025 earnings related to higher provisioning costs, while others remained resilient in profitability.

Zenith Bank and Guaranty Trust Holding Company remained among the best performers, sustaining trillion-naira profit levels and distributing record dividends to shareholders.

Wema Bank also drew investors’ interest after posting triple-digit profit growth, driven by loan growth and digital banking activity.

Other lenders have more complicated transitions to navigate.

United Bank for Africa’s profits were hit by large impairment charges linked to the end of forbearance rules, while investors remained wary of the pending merger of Unity Bank and Providus Bank until integration risks became clearer.

For many retail shareholders, dividends remain the key test of whether the recapitalisation exercise was of value.

Bisi Bakare, National Coordinator, Pragmatic Shareholders Association of Nigeria, expressed satisfaction with the Bank’s performance and confidence in future returns at the 35th Annual General Meeting (AGM) of Zenith Bank Plc.

“As shareholders of Zenith Bank Plc, we are very happy because what we are after every year is return on our investments, and today we are getting N10 dividend, and I believe by year end 2026, they are going to pay more, she said.

“Another shareholder who spoke on the condition of anonymity said they supported the banks because investors believed they would come out stronger.”

Then he added that shareholders are watching closely now. “If banks raise this level of capital, investors expect consistent returns and better corporate governance,” he said.

The NGX Banking Index is currently at +57.68 percent, attracting investor interest so far, but market analysts say the sector is no longer one uniform story.

Rather, the next phase is likely to split between banks with a strong ability to deploy capital, diversified sources of income and disciplined risk management, and those still struggling to convert larger balance sheets into sustainable profitability.

For investors, recapitalisation might have answered the immediate question of banking stability.

The bigger question now is which banks can transform new capital into durable shareholder returns.