CBN ends regulatory leniency, orders Banks to submit capital restoration plans

In a decisive move to strengthen Nigeria’s banking sector and transition out of the era of regulatory forbearance, the Central Bank of Nigeria (CBN) has issued a directive mandating all affected banks to submit a Capital Restoration Plan (CRP) by mid-2025.

The plan is part of a broader strategy to reinforce capital adequacy, improve loan quality, and ensure the long-term resilience of the nation’s financial system.

The directive, announced via a circular signed by the CBN’s Director of Banking Supervision, Olubukola Akinwunmi, and published on the apex bank’s website, signals a shift from the relaxed oversight introduced during the COVID-19 crisis and subsequent economic disruptions.

According to the circular, beginning June 30, 2025, affected banks must submit a comprehensive Capital Restoration Plan to the CBN within 10 working days following the end of each quarter.

These plans will serve as blueprints for how banks intend to restore full regulatory compliance, particularly in capital adequacy and asset quality.

Over the past few years, the CBN had offered regulatory flexibility to help banks weather severe macroeconomic turbulence—including the COVID-19 pandemic, inflation surges, and the devaluation of the naira.

These leniencies allowed banks to avoid full provisioning on bad loans and temporarily bypass capital adequacy shortfalls.

READ ALSO: BDCs eye mergers as CBN recapitalization deadline threatens survival

But as economic conditions begin to stabilise and the apex bank sharpens its focus on macro-financial stability, the regulator says it’s time to phase out these accommodations and reinforce responsible banking practices.

Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), described the move as a “welcome but tough” reset for the industry.

“The post-COVID reliefs were essential at the time, but we cannot afford to normalize weak compliance. This directive will push banks to clean up their books and return to robust financial health,” Yusuf said.

“However, it will not be easy for all. Smaller banks will face pressure to raise capital or consider mergers.”

Tope Fasoranti, investment analyst at EFG Hermes, sees the policy as a clear signal of the CBN’s intent to rebuild investor and depositor confidence.

“This move brings clarity and transparency back to the banking system. Investors—especially foreign ones—want to know that Nigeria’s banks are well-capitalised and well-regulated. This will help the naira and improve market sentiment,” she said.

Dr. Uche Igwe, a financial risk consultant, warned of short-term shocks but agreed with the long-term logic.

“Access to credit may tighten as banks de-risk aggressively. That may affect SMEs and retail borrowers. But the trade-off is a safer financial sector, which benefits the economy as a whole.”

]This policy marks the end of an extraordinary period of leniency and the beginning of a new era of tighter compliance and capital discipline.