Nigerian Banks Raise N4.65trn, Yet Economy Awaits Credit Boost

Despite a N4.65 trillion fresh capital injection into Nigeria’s banking industry, the sector’s 2025 financial performance showed that stronger capital buffers have yet to translate into stronger and broader financial sector growth, as elevated loan losses and the withdrawal of regulatory forbearance weighed heavily on profitability.
At the end of the recapitalization process in March this year, banks had jointly raised N4.65 trillion in fresh capital 72.55 per cent of which was sourced locally while 27.45 per cent came from international investors. According to the Central Bank of Nigeira (CBN) the recapitalization exercise was designed to strengthen banks’ capacity to absorb shocks and support larger lending to the economy.
The 2025 audited results of some listed banks show that loan impairment charges surged to about N3.2 trillion, representing a 39 per cent increase from N2.3 trillion in 2024. At the same time, the combined after tax profit of 10 major banks declined by 10.4 per cent to N5.2 trillion from N4.8 trillion, according to BusinessDay’s analysis.
This was a reflection of the pressure banks faced as the CBN wound down the regulatory forbearance measures introduced during the Covid 19 period, while lenders contend with inflation, high interest rates, foreign exchange volatility and weaker repayment capacity among borrowers.
Rather than immediately translating the fresh capital into a substantial expansion of productive credit, a significant portion of the stronger capital buffers has been absorbed by the process of cleaning up bank balance sheets.
Fitch Ratings said profitability generally declined in 2025 because of higher loan impairment charges and the absence of the large foreign exchange revaluation gains that boosted bank earnings after the naira devaluations of 2023 and 2024.
The ratings agency, however, said the recapitalisation has helped banks absorb the additional provisioning requirements arising from the withdrawal of forbearance without breaching regulatory capital requirements.
It noted that impaired loans rose sharply after the withdrawal of forbearance, with the sector’s impaired loan ratio reaching about eight per cent at the beginning of 2026 from 4.5 per cent at the end of 2024.
Meristem Research’s banking and fixed income analyst, Matilda Adefalujo, described the development as a balance sheet reset, noting that the end of forbearance forced banks to recognise previously deferred credit risks. According to her, the surge in impairment charges did not necessarily represent a collapse in core earnings but reflected delayed recognition of credit risk.
The N4.65 trillion recapitalisation has nevertheless materially strengthened the ability of banks to absorb these shocks. Fitch said the capital raised under the exercise enabled banks to absorb additional provisions and capital deductions arising from higher impaired loans and single obligor limit breaches while generally remaining within their minimum capital adequacy requirements.
But the central question has now shifted from whether banks have enough capital to whether that capital is translating into stronger credit creation and wider economic activity.
The CBN’s original rationale for the recapitalisation was to create stronger banks with the capacity to finance infrastructure, energy, manufacturing and other large scale economic activities. The apex bank said the exercise was intended to strengthen financial soundness and provide banks with the capacity to support economic growth.
Fitch expects that transition to become more visible in 2026, forecasting loan growth of about 20 per cent this year, compared with only about two per cent in 2025, as banks begin deploying the fresh capital they have raised.
The projection suggests that the real test of the recapitalisation may therefore not be the amount raised, but the volume and quality of credit ultimately created with the enlarged capital base.
The H1 2026 results of banks that have reported so far provide some evidence of earnings recovery, although the improvement is not uniform across the sector. Four banking groups, FCMB Group, Wema Bank, Sterling Financial Holdings and Ecobank Transnational, recorded combined profit after tax of N730.2 billion in the first half of 2026, compared with N636.4 billion in H1 2025, representing a 14.7 per cent increase.
FCMB led the growth with a 90.5 per cent increase in profit after tax to N139.8 billion, while Wema Bank’s PAT rose 50 per cent to N131.3 billion. Sterling Financial Holdings recorded a 20.6 per cent increase to N50.3 billion.
Ecobank, however, moved in the opposite direction, with profit after tax falling 5.8 per cent to N408.8 billion from N433.8 billion in H1 2025. First HoldCo also saw a significant recovery in the first half, reporting profit after tax of N526.13 billion, up 81.6 per cent from N289.77 billion in H1 2025. Its profit before tax rose 83.5 per cent to N653.54 billion.
The improving earnings picture supports Fitch’s expectation that profitability will recover moderately in 2026 as impairment charges decline and net interest margins remain relatively stable.
This shows that the recapitalisation has improved the resilience of Nigerian banks, providing them with larger buffers to absorb losses and has enabled the industry to withstand the asset quality deterioration that followed the end of regulatory forbearance.
With N4.65 trillion already raised, the immediate question is no longer how much capital Nigerian banks can mobilise, but how the stronger balance sheets will translate into cheaper and more accessible credit for businesses, households and the productive sectors.
Meanwhile S&P Global Ratings warned that high interest rates and the removal of regulatory forbearance will continue to weigh on Nigerian banks’ asset quality in 2026, although it expects lenders to retain sufficient earnings to absorb higher provisioning costs.
For the banking industry, therefore, the next phase of the reform will be measured less by capital raised and more by credit created, productive investment financed, asset quality maintained and the extent to which banking sector expansion feeds into real economic growth.