The World Bank has commended the Central Bank of Nigeria’s (CBN) ongoing banking sector recapitalisation, describing the exercise as a timely intervention to strengthen financial system stability and reposition lenders to drive private sector growth.
World Bank’s country for Nigeria, Mr. Matthew Verghis, gave the endorsement at Agusto & Co. ‘s 2026 Economic Roundtable, where policymakers, bankers and development experts examined the implications of the recapitalisation for the broader economy.
Verghis said the move became inevitable after years of macroeconomic headwinds weakened banks’ capital buffers. “The basic reason why this recapitalisation was needed, why banks had to dip into their pockets once again, is that over the decade of policy, banks had become undercapitalised.
“The capital requirements that were set in place, because of the exchange rate and because of the very high inflation, meant that capital adequacy ratios needed to be raised. Having an adequately financed banking sector is central. So for the stability of the economy, I think raising the capitalisation of the banking sector, I think the central bank has taken the right step,” he said.
He disclosed that about 25 of the 38 commercial and merchant banks had met the new capital requirements as of December, with roughly N2.5 trillion mobilised so far, while the remaining institutions have less than 50 days to comply.
The World Bank chief noted that the recapitalisation is part of the federal government’s wider reform programme, including foreign exchange harmonisation, the removal of fuel subsidies, and revenue reforms aimed at restoring macroeconomic stability.
According to him, the full benefits of the reforms will only be felt if inflation moderates sharply and growth accelerates beyond current levels. “In my view, inflation has to come down much faster. It has to bend down to single digits to avoid getting into people’s pockets.
“The second part of how people start feeling better from reforms is why it’s so critical that growth, 4 per cent, is good but not good enough. Growth needs to reach higher levels for Nigeria to achieve its ambition of becoming a trillion-dollar economy. That’s an aspirational goal, but that’s the kind of ambition Nigeria has shown a willingness to take action on,” he stated.
Verghis expressed concern that domestic credit to the private sector remains weak compared to peer economies. “The easiest way to see this is to look at the ratio of domestic credit to the private sector.
The ratio is about 21 per cent.
The Sub-Saharan average is 33 per cent, and countries like the Philippines do about 50 per cent,” he said, stressing that credit expansion must translate into productive investment.
With interest rates projected to ease over time, he noted that banks would be compelled to reduce their heavy exposure to government securities and redirect liquidity to the real sector. “The good news is that banks should be incentivised to do this. As interest rates come down, banks can no longer rely as heavily on investing in government securities. That liquidity will need to be put to good use. The incentives are well aligned, and I’m hopeful this will increase,” he added.
He identified micro, small and medium enterprises, which account for about 97 per cent of businesses in Nigeria, as critical to inclusive growth, despite persistent structural constraints such as informality and limited access to finance.
