₦4.65TN RECAPITALISATION PUTS BANKS TO NEW TEST

Barbara Bako, Abuja.

Nigeria’s banking sector is entering 2027 with stronger capital but faces a fresh challenge of turning the funds raised through recapitalisation into productive lending and stronger earnings.
DataPro, in its 2027 banking risk outlook, said the sector received about ₦4.65 trillion from the 2026 recapitalisation exercise, pushing the average Capital Adequacy Ratio to 25.5 per cent.
However, the strengthening of banks’ balance sheets came alongside a major cleanup of bad loans, with about ₦2.9 trillion in loans written off as pandemic-era regulatory forbearance was unwound.
The report said the major question for banks in 2027 would no longer be how much capital they have, but how effectively they deploy it.
It identified regulatory capital requirements, limited lending to the real economy and election-year economic uncertainty as major risks facing the sector.
According to the report, the proposed 20 per cent HoldCo capital buffer could put additional pressure on banking groups, with Access Holdings and UBA estimated to require additional capital of about ₦656 billion and ₦416 billion, respectively.
DataPro also warned that high Cash Reserve Ratio requirements and attractive yields on government securities could continue to encourage banks to invest in risk-free assets rather than expand lending to businesses.
The report noted that despite the banking sector having about ₦180 trillion in total assets, MSMEs, which account for about 96 per cent of Nigerian businesses, receive less than five per cent of formal bank credit.
With the Central Bank of Nigeria cutting the Monetary Policy Rate to 23 per cent, the report said lower rates could support economic activity, although tight liquidity conditions and uncertainties around the 2027 elections could limit a significant expansion in private-sector lending.
It said banks would therefore need to focus on improving efficiency, increasing quality lending and strengthening credit risk management as they enter the post-recapitalisation era.