The Central Bank of Nigeria (CBN) has aggressively stepped up its enforcement of banking regulations in Nigeria, introducing a strict risk-based capital framework to prevent a fresh financial crisis.
Under this updated regime, financial institutions across the country must now hold capital reserves that directly reflect the specific degree of risk they undertake.
Speaking at the 37th edition of the Finance Correspondents Association of Nigeria (FICAN) Conference in Abuja, Dr Olubukola Akinwunmi, Director of Banking Supervision, revealed that the apex bank is systematically cracking down on insider lending abuses and corporate governance failures following the recent Nigerian banking recapitalisation drive.
Banking Regulations in Nigeria Shift Focus to Risk Capital
The new risk-based capital requirement framework, officially issued by the apex bank in March 2026, ensures that institutions remain genuinely resilient long after completing their capital-raising exercises. Rather than applying a single uniform floor across the board, the policy assesses every bank individually, tying mandatory reserves directly to unique operational profiles and business models.
Institutions engaging in higher speculative ventures or maintaining volatile portfolios must now preserve substantially higher buffers to absorb prospective losses independently.
“It’s not just about maintaining a minimum capital requirement. It’s about maintaining a capital requirement that speaks to the level of risk exposure or risk-taking that a bank has decided to embark on based on its business model,” Akinwunmi stated.
Anchored strictly on Sections 13 and 63 of the Banks and Other Financial Institutions Act (BOFIA), the framework mandates rigorous stress testing. These mandatory assessments evaluate whether an institution’s existing capital can withstand severe market shocks, including foreign exchange fluctuations, heavy loan concentration, macroeconomic disruptions, and internal governance breakdowns.
“This is a key thing that is happening quietly but it is meant to ensure that we maintain resilience even after the banking sector recapitalisation,” Akinwunmi added.
Risk-Based Capital Framework Tackles Insider Abuse
A central pillar of the regulatory offensive targets internal malfeasance. The CBN director warned that facilities linked to bank executives and major investors will face severe oversight under the new structure due to the existential threat they pose to institutional stability.
Akinwunmi emphasised that weak board oversight, poor credit choices, and excessive risk-taking historically precede systemic distress. Consequently, the regulator now strictly scrutinises the professional background, experience, and personal integrity of individuals appointed to senior executive and board positions.
Furthermore, the apex bank is enforcing its Insider Credit Circular issued in February 2025 without exception. This decisive posture has already forced several high-profile bank owners, major shareholders, and board members out of their respective institutions over non-compliance.
“If there is poor corporate governance, if insider credit pervades the industry, in a short time, we will all live to see a repeat of the problem that we have battled or dealt with through recapitalisation,” Akinwunmi warned.
Nigerian Banking Recapitalisation Controls Offshore Expansion
Addressing widespread market rumours regarding foreign operations, Akinwunmi clarified that the regulator has not created new restrictions prohibiting Nigerian lenders from expanding across the continent. Instead, the authority is strictly enforcing long-standing rules that cap a bank’s total investment in offshore subsidiaries at 10 per cent of its shareholders’ funds.
The supervisor noted that while these boundaries were previously ignored or loosely monitored, the current administration will no longer tolerate breaches. The regulator insists that fresh funds raised from local and international investors during the recapitalisation process must not be siphoned into risky foreign ventures that endanger the domestic core.
“There was no new rule. What simply happened was that we enforced the existing rules,” he clarified.
Digitised Supervision Enforces Strict Compliance
To ensure compliance across all operational tiers, the CBN has deployed an advanced digital Supervisory Examination Application. The software allows examiners to perform comprehensive audits electronically while generating an unalterable, transparent log of all supervisory decisions.
Beyond automating routine checks, the digital ecosystem uses data analytics and historical metrics to flag emerging vulnerabilities well before they endanger broader stability. Crucially, the platform incorporates artificial intelligence tools designed to archive the analytical expertise of veteran supervisors, ensuring continuity for younger examiners.
Concurrently, the apex bank has officially ended all previous regulatory forbearances, enforcing rigid limits on single obligor exposures and loan portfolio diversification.
“The Central Bank of Nigeria, under the leadership of Mr Olayemi Cardoso, has made it clear to the banking system that we will follow the rules to the letter,” Akinwunmi concluded.
