Nigeria’s banking regulator is moving into a stricter supervisory phase following the completion of its recapitalisation programme. The Central Bank of Nigeria (CBN) says it will now prioritise enhanced risk management, including stress testing and tighter capital controls, to safeguard financial system stability.
New Framework Targets Resilience and Stability
The Central Bank of Nigeria confirmed that the next phase of oversight is designed to consolidate the gains achieved during the recapitalisation exercise and strengthen banks against economic shocks.
According to the regulator, the updated framework introduces stricter capital discipline and reinforces existing supervisory mechanisms to ensure that deposit money banks remain resilient amid both domestic and global financial uncertainties.
Mandatory Stress Testing and Capital Buffers
Speaking in an interview on ARISE NEWS Channel, the Director of Banking Sector Supervision, Olubukola Akinwunmi, said the apex bank has upgraded its risk-based capital adequacy requirements.
He explained that banks are now mandated to conduct regular stress tests under defined economic scenarios and maintain adequate capital buffers to absorb potential losses.
“To safeguard these gains, the CBN has strengthened its risk-based capital adequacy framework, requiring banks to conduct regular stress testing across defined scenarios and maintain appropriate capital buffers,” Akinwunmi said.
He added that prudential guidelines and supervisory policies will undergo periodic reviews to strengthen governance, risk management practices, and overall sector resilience.
Proactive Approach to Emerging Risks
Akinwunmi emphasised that the new framework marks a shift toward proactive risk monitoring rather than reactive intervention. He noted that banks are expected to model potential downturns, including deterioration in loan performance caused by economic shocks affecting households, businesses, and other borrowers.
Under the stress testing regime, lenders must continuously evaluate how adverse scenarios could impact their loan portfolios and capital positions. Where risks are identified, banks are expected to take early action—either by raising additional capital or adjusting their lending strategies.
“We don’t have to wait decades before ensuring that banks are adequately capitalised,” he said, stressing the need for continuous capital adequacy monitoring.
Analysts See Shift to Capital Preservation
Financial analysts say the CBN’s move signals a strategic transition from capital raising to capital preservation and efficient utilisation. The approach is expected to reduce the likelihood of past challenges, including declining asset quality and weak risk controls within the banking sector.
They note that the enhanced regulatory focus will improve financial system stability while encouraging banks to adopt more disciplined lending and risk management practices.
