Nigeria’s banking industry will enter 2027 with stronger capital buffers, but under intense pressure to prove that the additional capital can translate into productive lending and sustainable earnings, DataPro has said.
The credit rating and risk management firm, in the first edition of its Risk Quarterly® magazine, said the N4.65 trillion injected into the banking system through the 2026 recapitalisation exercise had significantly strengthened banks’ balance sheets, lifting average Capital Adequacy Ratios to 25.5 percent.
However, DataPro said the sector paid a substantial price for the balance-sheet clean-up that accompanied the recapitalisation, with banks recording about N2.9 trillion in loan write-offs as pandemic-era regulatory forbearance was unwound.
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The write-offs effectively absorbed about 63 percent of the fresh capital raised by the industry, shifting the focus of the post-recapitalisation era from the size of banks’ capital to their ability to deploy it efficiently and generate quality returns.
According to DataPro, the central risk question for the banking industry in 2027 will therefore be whether banks can convert their enlarged capital bases into productive assets and durable earnings without triggering another cycle of deteriorating asset quality.
It identified three major structural pressures that could shape the industry’s performance next year: regulatory capital requirements, weak productive credit growth and macroeconomic volatility associated with the election cycle.
A major concern is the proposed 20 percent HoldCo capital buffer by the Central Bank of Nigeria, which DataPro said could trap significant amounts of capital at the holding-company level rather than allowing it to be deployed by operating banking subsidiaries.
The impact, according to the firm, would be particularly significant for internationally licensed banking groups.
DataPro estimates that Access Holdings could face an incremental capital requirement of about ₦656 billion under the proposed framework, while United Bank for Africa could require an additional N416 billion.
The firm warned that the requirement could put further pressure on returns on average equity as banks seek to maintain adequate capital across their structures.
At the same time, the industry’s large balance sheet has yet to translate into commensurate credit flows to the real economy.
DataPro said Nigerian banks now hold about ₦180 trillion in total assets, but lending to businesses remains constrained by the prevailing liquidity and monetary policy environment.
It identified the 45 percent Cash Reserve Ratio and Treasury bill yields of around 21 percent as key factors creating what it described as a “liquidity gravity” effect, encouraging banks to allocate capital to relatively low-risk sovereign instruments rather than extending more credit to…
Read More: Banks face productivity test after N4.65trn recapitalisation – DataPro
