Nigeria Banks Positioned for Growth after Paid-In Capital -Fitch
All Fitch-rated licenced Nigerian banks have met the new paid-in capital requirements effective from end-1Q26, as have the majority of non-rated banks, Fitch says.
The fresh capital raised has smoothed the banking sector’s exit from longstanding regulatory forbearance and, in many cases, provides significant room for business growth.
In March 2024, the Central Bank of Nigeria (CBN) announced a significant increase in paid-in capital requirements for commercial, merchant and non-interest banks. Banks were given only three ways to comply – through equity injections, M&A activity or downgrading their licence authorisation.
After the programme deadline, the CBN recently announced that 33 licenced banks have complied with the new requirements, including all of the 11 banks rated by Fitch.
Depending on their circumstances, Fitch believes that the small number of non-compliant banks may either be given more time to raise the necessary capital or be compelled to merge or downgrade their licences.
M&A activity has been very limited, with almost all banks complying by raising fresh core capital. Fitch said capital raisings have enabled many banks to absorb additional provisions and capital deductions associated with the expiry of longstanding regulatory forbearance relating to the classification and provisioning of problem loans.
Particularly, oil and gas loans and single-obligor limit breaches, which CBN withdrew at the end of 1H25 while remaining compliant with their respective total capital adequacy ratio (CAR) requirements.
Fitch’s baseline forecasts are for Brent crude to average USD70/bbl in 2026, up from just over USD68/bbl in 2025, which will support the oil and gas companies performing on restructured terms.
Several banks, including most of those rated by Fitch, are expected to have CARs of over 20% at end-1Q26 due to capital raisings and strong profitability supported by current high interest rates.
These large buffers over minimum CAR requirements – 15% for banks with international authorisation and 10% for all other licenced banks – provide significant room for business growth.
Fitch estimates the banking sector’s nominal loan growth at just 5% in 2025, reflecting challenging credit conditions, the crowding-out effect of high interest rates available on fixed-income securities, and the withdrawal of forbearance measures.
“We forecast nominal loan growth to accelerate to over 20% in 2026 as banks begin to deploy the fresh capital they have raised, supported by higher single-obligor limits”.
However, loan growth will remain constrained by high inflation and tight monetary policy conditions, lower credit demand ahead of the presidential election in January 2027, and the constraining effect of the CBN’s high cash reserve ratio requirement (45% of naira deposits) and attractive interest rates available on fixed-income securities on credit supply.
Average oil prices could be higher than USD70/bbl depending on the course and impact of the Iran war, which may incentivise banks to grant more loans to oil and gas companies but could accelerate the repayment of existing oil and gas loans and reduce broader private sector credit demand through higher inflation.
Some well-capitalised first- and second-tier banks with international licence authorisation are likely to channel some of the fresh capital raised into cross-border growth to increase geographical diversification and capture trade and financial flows across the continent.
Certain banking groups with large foreign operations are expected to use some of the fresh capital to support the growth of their existing subsidiaries, while other, more domestic-focused banks are expected to gradually venture into new markets across the continent.
Greater risk-weighted asset growth will cause CARs to decline, but Fitch expects that strong profitability, supported by high interest rates and increased business volumes, will ensure that several Fitch-rated banks will still have CARs above 20% at end-2026.
Some of the constraints on loan growth may ease thereafter, supporting further loan and business growth, and reducing CARs closer to minimum requirements at the end of 2027.
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