The Central Bank of Nigeria (CBN) has warned that the success of the country’s ongoing bank recapitalisation programme will depend not only on increased capital but also on stronger governance structures and stricter risk management practices across the financial system.
The apex bank said robust oversight and disciplined risk frameworks are essential to ensure that the recapitalisation exercise strengthens financial institutions and supports long-term economic stability.
Dr Blaise Ijebor, Director of the Risk Management Department and Chief Risk Officer at the CBN, stated this on Thursday during a virtual risk management roundtable organised by the Association of Enterprise Risk Management Professionals (AERMP).
The event, convened in Lagos, was themed “Recapitalisation, Mergers and Acquisition in the Nigerian Financial System: Minimising Risks and Maximising Opportunities for Greater Post-Recapitalisation Value.”
Speaking through another CBN director, Olabanji Samuel, Ijebor said the ongoing recapitalisation programme is a macro-financial stability initiative designed to strengthen the resilience of financial institutions and position the banking sector for sustainable growth.
He noted that past experiences in Nigeria’s banking sector show that capital injections alone cannot guarantee financial stability without strong governance and sound risk management.
“Capital builds strength, but governance sustains it,” Ijebor said.
He recalled that earlier consolidation exercises, particularly the 2004–2005 banking reforms and the period following the 2009 global financial crisis, revealed that weak governance, poor credit risk practices and incentive-driven lending had undermined even well-capitalised banks.
According to him, the current recapitalisation exercise is more forward-looking and aligned with global regulatory standards, incorporating mechanisms such as stress testing, capital adequacy assessments and recovery planning to ensure banks can withstand shocks without relying on public intervention.
Ijebor said the exercise places greater responsibility on risk and compliance professionals within financial institutions, describing them as strategic partners in safeguarding the system.
He urged risk management leaders to provide forward-looking analysis on how recapitalisation and possible mergers or acquisitions could reshape institutional risk profiles, while compliance officers should anticipate regulatory implications and ensure strict adherence to standards.
The CBN official identified several key risk areas that require careful monitoring during the recapitalisation process.
These include balance sheet vulnerabilities, operational and integration risks arising from mergers and acquisitions, systemic risks within the financial system, as well as governance and regulatory compliance challenges.
He stressed the importance of rigorous stress testing, accurate asset valuation, effective board oversight and strict management of anti-money laundering (AML) and counter-terrorism financing (CFT) frameworks.
According to him, the recapitalisation process also offers banks an opportunity to strengthen enterprise risk management systems, improve data governance and integrate risk considerations into strategic planning and decision-making.
Ijebor warned that the availability of additional capital should not encourage excessive risk-taking by financial institutions.
Instead, he urged bank boards and management teams to recalibrate their risk appetite frameworks and ensure that capital allocation supports sustainable growth and long-term value creation.
He added that if properly managed, the recapitalisation exercise could unlock major opportunities for the financial sector, particularly in infrastructure financing, capital market development, trade facilitation, technological innovation and cybersecurity resilience.
“Opportunities will not realise themselves; they depend on the choices we make today,” he said.
Ijebor further emphasised the need for accountability at the highest levels of bank leadership, noting that transparency, effective governance structures and long-term incentive systems are critical to ensuring the success of the recapitalisation programme.
He described the ongoing exercise as a pivotal moment for Nigeria’s financial system with the potential to create stronger and more resilient financial institutions capable of supporting economic growth.
“The difference between success and failure will be shaped by governance, discipline and strategic clarity,” he said.
Meanwhile, panelists at the roundtable cautioned that Nigeria’s ongoing recapitalisation efforts across multiple sectors could also create new systemic risks if not properly coordinated.
Prof. Olufemi Awoyemi, Founder and Chairman of Proshare Ltd, warned that simultaneous capital raising across different sectors is putting pressure on market capacity and exposing coordination gaps among regulators.
Similarly, Ms Bunmi Lawson, pioneer Managing Director and Chief Executive Officer of EDFIN Microfinance Bank Ltd, said the emergence of larger financial institutions requires stronger risk frameworks, improved regulatory capacity and more efficient capital deployment.
Also speaking, Prof. Ehi Esoimeme, Professor of Business Law and Ethics at James Hope University, highlighted the risk of financial crimes during periods of large-scale capital inflows and restructuring.
He called for stricter due diligence procedures, stronger data management systems and more robust monitoring mechanisms to guard against money laundering and other illicit financial activities.
The panelists agreed that while recapitalisation offers significant opportunities for growth and sectoral transformation, effective governance and disciplined risk management will ultimately determine whether the exercise delivers sustainable value for Nigeria’s financial system. (NAN)