Achieving economic growth, stability, and confidence through banking reform (Part II)

Institutional and sectoral reforms in Nigeria have, in recent years, extended beyond taxation and fiscal policy to touch nearly every critical sector of the economy. From energy and power to healthcare, education, aviation, anti-corruption, ICT, grassroots governance, and the rule of law, reform has become a defining feature of the policy landscape. One sector where this reform momentum is both consequential and unavoidable is banking and financial services, given its central role in mobilising capital, supporting investment, and anchoring economic confidence.

This reality was underscored by a recent headline in national dailies announcing that 21 banks had met the Central Bank of Nigeria’s (CBN) new minimum capital requirements as of January 8, 2026, with a compliance deadline of March 31, 2026. The banks span international, national, merchant, and non-interest categories, with capital thresholds set at ₦500 billion for international banks, ₦200 billion for national banks, ₦50 billion for merchant banks, and between ₦10 billion and ₦20 billion for non-interest banks. While the list itself is noteworthy, the broader implication is more important: Nigeria has once again entered a decisive phase of banking reform aimed at strengthening financial stability and restoring confidence.

Globally, banking reforms are rarely cosmetic. They are driven by the need to reduce systemic risk, prevent bank failures, strengthen corporate governance, expand the capacity of banks to support the real economy, and shield domestic financial systems from the adverse effects of financial globalisation. Nigeria’s experience is no exception. Banking reforms here have historically been responses to structural weaknesses, macroeconomic shocks, or changing global standards.

Nigeria’s banking reform journey spans several distinct phases. The regulation and indigenisation era between 1958 and 1985 laid the foundation with the establishment of the CBN and the introduction of basic supervisory frameworks. The market deregulation period of 1986 to 1993, shaped by the Structural Adjustment Programme, expanded the number of banks significantly and modernised payment systems through innovations such as magnetic ink character recognition. This expansion, however, exposed weaknesses that necessitated the guided deregulation phase of 1994 to 1998, marked by interest rate liberalisation and upward reviews of minimum capital requirements.

The universal banking era from 1999 to 2003 allowed banks to operate across multiple financial services, but this model soon proved unwieldy. It gave way to the consolidation phase of 2004 to 2010, which reduced the number of banks and strengthened balance sheets. The restructuring and sanitisation period between 2011 and 2014 followed, featuring bank acquisitions and nationalisations aimed at preventing systemic collapse. Subsequent phases, including the pre-COVID and post-COVID eras, introduced further reforms such as tighter prudential standards, foreign exchange adjustments, and the current recapitalisation programme.

Within the financial services sector, reforms typically take three forms. External or regulatory reforms are imposed by authorities such as the CBN to address systemic risks, as seen in past consolidation exercises. Internal or institutional reforms are driven by banks themselves, often to improve efficiency or reduce costs, such as outsourcing non-core services. Global reforms, meanwhile, reflect international standards that cut across borders, with the adoption of International Financial Reporting Standards being a notable example in Nigeria’s corporate and financial reporting landscape.

The benefits of sustained banking reform are substantial. Stronger capital bases improve banks’ capacity to lend to productive sectors, enhance resilience to shocks, encourage technological innovation, and support financial inclusion. Improved supervision and surveillance also reduce the likelihood of crises, while a more credible banking system strengthens investor confidence and economic stability.

Yet reform is not without costs. Recapitalisation can disadvantage weaker institutions, lead to job losses from branch rationalisation, and place pressure on heavily indebted borrowers. There may also be perceptions of uneven regulatory treatment or temporary supervisory challenges. These pains, however, must be weighed against the far greater risks of inaction: fragile banks, eroded confidence, and systemic instability.

Ultimately, banking reform is not an end in itself but a means to a larger goal. A sound, well-capitalised, and efficiently regulated banking system is essential for achieving sustainable economic growth, maintaining macroeconomic stability, and rebuilding public trust in financial institutions. Change, like reform, is inevitable. What matters is ensuring that reform objectives are pursued consistently, transparently, and in the public interest. Only then can banking reform serve as a true catalyst for growth, stability, and confidence in Nigeria’s economy.

Dr Kingsley Ndubueze Ayozie FCA, a Public Affairs Analyst & a Chartered Accountant, writes from Lagos.

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