CBN capital restoration plan mandates urgent strategies from banks to stabilise capital, signalling a vital shift away from regulatory forbearance measures
CBN capital restoration plan has officially taken effect as Nigeria’s apex bank moves to end the era of regulatory forbearance.
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In a circular published on Monday and signed by Olubukola Akinwunmi, Director of Banking Supervision, the Central Bank of Nigeria directed all affected banks to submit a clear and detailed plan to restore their capital positions.
The restoration plan must be submitted no later than the 10th working day after each quarter, beginning 30 June 2025.
The objective is to ensure that banks establish forward-looking capital strategies that reflect healthy risk management and governance practices.
In addition to submitting the capital plan, banks must also prepare for increased transparency. The CBN has now made it mandatory for institutions to disclose key financial metrics on a quarterly basis.
These include capital adequacy ratio (CAR) with and without transitional relief, loan classification migration data, and status updates on Additional Tier 1 (AT1) capital instruments.
“This directive marks a pivotal phase in the transition from forbearance to normalised oversight,” the apex bank stated. “It reinforces our commitment to macro-financial stability and prudent banking practices.”
CBN’s plan is seen by analysts as a strong yet supportive move to push lenders towards long-term resilience. In the years following economic disruptions and weakened asset quality, many Nigerian banks operated under temporary relief from strict capital regulations.
That period is now coming to an end. As the CBN discontinues single obligor limit waivers and forbearance exposure treatments, banks are expected to adapt their business models and strengthen their capital base.
The circular highlighted several components that each restoration plan must include. Among them are cost-cutting measures, significant risk transfers, and adjustments to existing lending strategies.
Banks may also be expected to reduce exposure to high-risk assets and suspend payment of dividends and bonuses until they achieve regulatory compliance.
Olumide Sanni, a Lagos-based financial analyst, called the move “a necessary reset” for the industry. “It’s time for banks to stand on firmer ground. The CBN is making it clear that temporary leniency won’t last forever,” he said.
Affected institutions are now faced with the challenge of responding swiftly. Each plan submitted will undergo regulatory review and serve as a basis for close supervisory engagement.
The CBN will continuously monitor each bank’s progress until capital and asset quality levels are fully normalised.
This directive arrives at a time when financial institutions are grappling with exchange rate volatility, rising operational costs, and loan default risks. Despite these challenges, the apex bank insists that regulatory standards must be upheld.
CBN also underscored the need for clear disclosure of how AT1 capital instruments are used. This includes information about issuance terms and related conditions. It is another step towards greater transparency and regulatory alignment with international norms.
Financial market observers suggest that some banks may need to recapitalise or merge in order to meet the expected standards.
The new policy will test both the strategic planning and resilience of Nigeria’s banking sector in the coming year.
While the capital restoration plan presents challenges, it also offers a path to long-term sustainability. With effective risk controls and disciplined financial planning, banks can regain strength.
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As Nigeria navigates economic recovery, robust institutions will play a crucial role in supporting growth and investor confidence.
