…Risk, not size, now defines bank strength in Nigeria, Says Cardoso
Nigeria’s Central Bank has signalled a tougher regulatory stance on lenders following the completion of a sweeping recapitalisation exercise, as it moves to reinforce corporate governance, restore investor confidence and safeguard financial system stability.
Speaking at the Chartered Institute of Directors Nigeria’s induction ceremony in Lagos on Thursday, Olayemi Cardoso, governor of the Central Bank of Nigeria (CBN), represented by Olubukola Akinwunmi, director of Banking Supervision, said the focus has now shifted from raising capital to enforcing discipline across bank boards and management.
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He described the recapitalisation as a “strategic imperative” rather than a routine regulatory requirement, aimed at strengthening resilience and positioning banks to support sustainable economic growth. But he stressed that stronger balance sheets must now be matched by stricter governance standards.
“The role of directors becomes even more critical in this new phase,” he said. “Stewardship must now be exercised with sharper focus on consolidation, confidence and stability.”
The remarks underscore a broader pivot by the apex bank toward tighter oversight after a period marked by governance failures and regulatory interventions.
In January 2024, the Central Bank dissolved the boards and management of three banks over serious breaches, reinforcing its willingness to act decisively where oversight lapses threaten financial stability.
That stance has been followed by a wave of new rules targeting boardroom conduct and accountability. Among them is a directive requiring systemically important banks to secure regulatory approval for incoming chief executives at least six months before a transition, and to announce successors three months ahead, measures designed to prevent leadership vacuums.
The CBN has also moved to curb insider abuses through stricter limits on related-party lending, while reinforcing expectations on transparency, board independence, and disclosure of financial and governance information.
“These measures are not punitive,” Cardoso said. “They are enabling, providing directors with the framework to exercise stewardship with discipline, foresight and confidence.”
A key plank of the post-recapitalisation framework is the introduction of risk-based capital requirements, which tie banks’ capital levels more closely to the risks they take. The shift marks a departure from earlier regulatory forbearance and signals a more rules-based approach to supervision.
Under the new regime, directors are expected to take greater responsibility for aligning capital planning with risk exposure, strengthening oversight of credit, market and operational risks, and ensuring compliance without reliance on regulatory leniency.
The Central Bank said the move embeds risk awareness into strategic decision-making and is intended to ensure that recapitalisation translates into genuine financial system stability rather than simply larger balance sheets.
Beyond capital and risk, regulators are placing increasing emphasis on governance structures, including annual board evaluations, succession planning, and “fit and proper” criteria for directors. These measures are designed to ensure that only individuals with the required integrity, competence and financial soundness oversee financial institutions.
The renewed focus comes as Nigeria’s banking sector navigates a more complex operating environment marked by economic reforms, technological disruption and evolving customer expectations. Regulators say this requires more active and accountable boards capable of balancing profitability with long-term sustainability.
Cardoso said directors must move beyond passive oversight to become “active stewards,” guiding institutions through economic cycles while maintaining ethical standards and protecting stakeholder interests.
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He also signalled that the Central Bank sees board members as critical partners in translating reforms into tangible outcomes for the economy, particularly in rebuilding trust in the financial system.
“As directors, your responsibilities extend beyond boardrooms,” he said. “The choices you make will shape the future of Nigeria’s economy.”
The CBN’s post-recapitalisation push is expected to reverberate beyond the banking sector, raising governance standards across corporate Nigeria as stricter rules on disclosure, accountability and risk management take hold.
With capital now bolstered, regulators appear determined to ensure that governance failures that triggered past banking crises are not repeated, even as they push lenders to play a stronger role in supporting economic growth.