Despite generating over N1.35 trillion in new capital during the first year of Nigeria's bank recapitalisation initiative, top-tier banks are facing challenges in competing with their continental counterparts, primarily due to the significant devaluation of the naira.

This is a major insight from a recent report by the financial intelligence platform Proshare, titled "Tier 1 Banks: Getting Bigger, Braver, and Dominant – The Class of 2025."

Proshare pointed out that the naira’s decline from below N500/US$ in 2023 to around N1,600/US$ in 2025 has substantially eroded the dollar value of Nigerian banks’ capital. To compensate, banks have been raising funds through rights issues, public offerings, private placements, and, in some cases, direct injections from their parent companies.

More about the report.

However, the report emphasised that simply increasing capital will not achieve the transformative changes the Federal Government aims for, such as reaching a $1 trillion economy by 2030, as Nigeria's top-tier banks still lag behind their continental counterparts.

“Before recapitalisation efforts began in April 2024, Nigeria’s Tier-1 banks had a combined capitalisation of $2.33 billion. Following the capital raise in naira terms, their dollar-equivalent capitalisation now stands at just $1.7 billion—a decline that places them far behind their South African counterparts, which boast a combined capitalisation of $4.16 billion,” the report revealed.

The Central Bank of Nigeria’s (CBN) recapitalisation programme, which began on April 1, 2024, and runs until March 31, 2026, excludes retained earnings from Common Equity Tier 1 (CET1) calculations. In response, banks have primarily relied on rights issues, public offers, and private placements to meet CET1 requirements. However, the report suggests that recapitalisation alone is just the first step.

Without a strategic overhaul in how banks allocate capital and engage with Nigeria’s real economy, the additional capital may not result in the transformative impact expected. One key recommendation from the report is to restructure Nigeria’s 46 economic sectors into 14 targeted "sub-economies" to streamline financial planning and promote deeper sectoral engagement.

The report identifies key priority areas, including the Marine and Blue Economy, Entertainment and Creative Industries, Hospitality and Real Estate, and Minerals, Mining, and Energy. It stresses that stronger banks should realign their lending portfolios to focus on these emerging growth sectors, offering medium- to long-term capital to boost productivity and create jobs.

Additionally, the report highlights the significant impact of artificial intelligence (AI) and automation in transforming Nigeria’s banking sector. It suggests that as banks adopt “headless banking”—digitised operations with minimal human interaction—cost-to-income ratios (CIRs) are likely to decrease, while net interest margins (NIMs) may improve.

“Automation of credit decisions, audits, and risk assessments could also lead to staff reductions, particularly in traditional back-office roles, while opening up new positions in tech and digital services. Banking as a building may die, but banking as a service will remain very much alive,” the report noted.
As the recapitalisation deadline approaches, analysts anticipate a surge in mergers, acquisitions, and business consolidations, particularly among Tier-2 banks struggling to generate enough equity.

“This may be just the first in a series of recapitalisation rounds aimed at building long-term resilience in Nigeria’s banking industry,” Proshare stated.

Rewane predicts new naira against US dollar
Legit.ng reported that Bismarck Rewane, the Chief Executive Officer (CEO) of Financial Derivatives Company, has projected that the naira will trade between N1,600 and N1,650 in the official foreign exchange market in June and July.

He cited data that indicated effective measures by the Central Bank of Nigeria to manage money supply growth, which peaked at 78% in May last year, as the basis for his projection about the Nigerian currency.

He gave this projection while speaking at the recent Lagos Business School breakfast club meeting.