After two years of raising fresh capital, navigating stricter regulations, and courting investors, pressure is mounting on Nigerian banks to prove they can translate enlarged capital bases into stronger and sustainable profits ahead of the next earnings season.
Following the completion of the recapitalisation exercise led by the Central Bank of Nigeria (CBN), banks raised a combined N4.65 trillion to meet new regulatory requirements, significantly strengthening the financial sector.
However, shareholders who funded the expansion are now demanding improved dividends, stable earnings, and stronger share price growth.
According to the apex bank, 33 lenders met the new capital thresholds, while Heritage Bank reportedly emerged as the only major casualty after failing to improve its financial condition despite regulatory intervention.
Investors are expected to reap an estimated N27 trillion in returns, up from N21.97 trillion in 2024, but concerns remain over whether banks can sustain profitability beyond regulatory compliance.
Financial analysts say recapitalisation has expanded banks’ ability to finance major infrastructure, energy, manufacturing, and trade deals, as lenders can now extend larger credit facilities under existing prudential guidelines.
However, experts warn that raising capital and deploying it profitably are different challenges. Managing Director of Optimus by Afrinvest, Ayodeji Ebo, noted that the sector has shifted from focusing on solvency to execution.
“Banks that can deploy capital efficiently into quality assets will sustain returns. Those holding excess liquidity may face pressure on return on equity in the coming years,” he said.
Despite challenges caused by the end of CBN regulatory forbearance and rising loan impairment costs, some lenders have continued to post strong results.
Zenith Bank and Guaranty Trust Holding Company maintained trillion-naira profits and rewarded shareholders with record dividends, while Wema Bank attracted investor attention with triple-digit profit growth.
Meanwhile, investors remain cautious about lenders facing transition challenges, including United Bank for Africa and the proposed merger between Unity Bank and Providus Bank.
Market analysts say the next phase for the banking sector will separate institutions with strong capital deployment, diversified income, and disciplined risk management from those struggling to turn larger balance sheets into lasting shareholder value.
