AS the deadline for the Central Bank of Nigeria (CBN) mandatory recapitalisation draws near, banks are expected to raise additional N900 billion before the year-end, according to a report sighted by The ICIR.
The report, ‘2025 Nigerian Banking Industry Report,’ was released by Agusto & Co. Limited, a pan-African credit rating agency.
It provides a comprehensive review of Nigeria’s banking industry, detailing the industry’s structure, competitive environment, regulatory landscape, financial condition, trends, near-term expectations, and outlook.
“We anticipate the injection of an additional N900 billion as a significant number of banks strive to comply with the minimum capital directive before 31 December 2025.
“Thus, providing additional capital buffer for current business risks and near-term growth plans,” it stated.
Between January and July this year, banks have raised about N800 billion in capital and are expected to raise additional N900 billion in the last five months of the year, ahead of the March 31, 2026, recapitalisation deadline.
Last year, 16 banks raised N1.7 trillion, but as of July 31 this year, only eight banks have met the minimum capital requirement, according to a recent disclosure by CBN Governor Olayemi Cardoso.
In March 2024, the apex bank introduced the minimum paid-up capital requirement to drive recapitalisation activities in the banking industry, The ICIR reported.
It pegged the minimum capital requirement for commercial banks with international exposure at N500 billion, commercial banks with national authorisation at N200 billion, regional banks and merchant banks at N50 billion, non-interest banks with national and regional operations at N20 billion and N10 billion, respectively.
In its report, Agusto & Co noted, however, that the mandatory verifications by the CBN and Securities and Exchange Commission (SEC) are pending on some of the capital raised.
“We note positively that domestic investors provided most of the capital raised by the banks in the last 19 months, reflecting the acceptability of the Industry by Nigerians,” it stated.
Non-performing loans to rise to 6.9%
According to the report, banks’ non-performing loans, which stood at 5.2 per cent as of December 31, 2024, higher than four per cent recorded in 2023, are likely to surge to 6.9 per cent at year’s end.
“We note that some non-performing loans benefitting from regulatory forbearance were included in the stage 2 category as at 31 December 2024.
“In June 2025, the CBN terminated the regulatory forbearance. Thus, all loans are expected to be classified appropriately with the required provisions taken,” it stated.
All credit exposures are also expected to comply with the prescribed single obligor limit (SOL).
The ICIR reports that a single obligor loan refers to the maximum amount a bank can lend to a single borrower or a group of related borrowers. In Nigeria, the Central Bank of Nigeria (CBN) sets guidelines to limit exposure to a single obligor to reduce concentration risk.
The ICIR reported that CBN had directed banks with unresolved forbearance exposures to submit a recovery plan.
Agusto & Co believes the ongoing capital raising activities will resolve most SOL breaches on some exposures hitherto under forbearance.
“We also anticipate a surge in write-offs as some banks leverage the transition relief (waiver on the twelve-month mandatory waiting period for duly provisioned impaired loans before write-offs) to address non-performing forbearance loans.
“Notwithstanding, we believe the Industry’s impaired loan ratio will surge to 6.9% as some non-performing forbearance loans are classified appropriately,” it said.
It, however, expects a reduction in the impaired loan ratio before December 31, 2026, as the non-performing loans are resolved.
Profit before tax to decline by 19.2%
Relative to 2023 and 2024 financial performances, banks are likely to see a decline in their profit margins this year.
“In FY 2025, we anticipate a decline in profitability indicators,” Agusto & Co. maintained.
It expects forbearance loans to drive a surge in the impairment charge as banks decide to write off some impaired loans as part of the transitional relief measure.
“In addition, we anticipate lower foreign currency revaluation gains that have bolstered profitability since FY 2023.
“Overall, we expect a 19.2% decline in profit before taxation with the pre-tax return on average equity plummeting to 27.3% (FY 2024: 48.2%) in FY 2025,” the report showed.
The banking industry’s profitability is, however, expected to rebound in 2026 as the proceeds of the capital raising activities are fully deployed and the impact of the uptick in the impairment charge is moderated.
Assets to reach N242.3 trillion
According to Agusto & Co., the Nigerian banking industry remains resilient, navigating various global and domestic macroeconomic headwinds.
“The industry has maintained an upward growth trajectory with total assets and contingents projected to reach N242.3 trillion ($151.4 billion @N1,600/$) by 31 December 2025 after expanding by 44.9% year-on-year to N186.6 trillion ($121.5 billion @₦1,536/$) as at 31 December 2024,” it projected.
Amid the funding pressure from the prevailing high-interest rate CBN contractionary stance, the banking industry remained liquid with a 59.4 per cent liquidity ratio compared to 43.5 per cent in 2023.
“We believe the liquidity ratio will exceed 60% by FYE 2025, supported by favourable, albeit declining, yields on treasury securities.
“In our view, banks will accelerate the adoption of innovative funding strategies, as reflected in the uptick in commercial paper issuances, to moderate the impact of the funding pressures,” it stated.
In the first seven months, commercial papers amounting to N750 billion were issued by various players.
“We anticipate more issuances, particularly as the prevailing yields gradually moderate in the latter part of the year,” it said.
Amid an expected N900 billion capital injection, profits decline, and a higher loan book, Agusto & Co added that it has attached a “stable” outlook to the Nigerian banking industry.