How CBN is reinforcing oversight to strengthen financial system

The Central Bank of Nigeria (CBN) is tightening its grip and reinforcing its commitment to a resilient and well-regulated financial system through stringent compliance measures, risk management frameworks, and a push for bank recapitalisation.

The apex bank under the leadership of Olayemi Cardoso aims to fortify Nigeria’s financial sector against emerging global challenges as his goal remains to protect Nigeria’s financial sector while ensuring its resilience and credibility locally and internationally.

As part of its regulatory agenda, the CBN recently hosted a high-level mandatory compliance and Anti-Money Laundering (AML) training workshop in collaboration with Citi. The event, held in Lagos, brought together compliance officers, trade operations specialists, and correspondent banking teams to discuss global regulatory trends, financial risks, and strategies for sustaining banking relationships.

Shola Phillips, special adviser to the CBN governor on Compliance, stressed the importance of dynamic, risk-based AML measures in safeguarding the financial system. CBN: Reinforcing vision of strong, resilient financial system

“Regulators expect financial institutions to maintain dynamic, risk-based AML/CFT programmes that are responsive to the evolving financial environment. Proactive engagement with regulatory developments and the integration of innovative compliance solutions are essential for institutions to meet these expectations effectively,” Phillips stated.

Siobhan Ni Ealaithe, managing director of Citi’s Correspondent Banking Group, highlighted the critical role of robust governance frameworks in mitigating risks. She underscored the necessity of Know Your Customer (KYC), Know Your Business (KYB), and Know Your Transaction (KYT) protocols in preventing illicit financial activities.

In the same breath, Stephanie Bailey, head of EMEA AML Risk Management for Foreign Correspondent Banking, provided a stark assessment of financial crime risks, noting that over $3 trillion in illicit funds flow through the global financial system annually while urging financial institutions to strengthen due diligence measures, leverage technology-driven risk assessments, and uphold transparency in all transactions.

Speaking recently to bankers, Cardoso said the ethics and professionalism of bankers and treasurers are under constant scrutiny. According to him, the apex bank introduced the FX Global Code for all authorized dealers and market participants to ensure full compliance with regulations, urging the Chartered Institute of Bankers of Nigeria (CIBN) to take the lead in upholding and demonstrating the highest standards in the industry.

“At the Central Bank, we have intensified surveillance of market activities to ensure compliance and eliminate bad actors who attempt to undermine the system. Together, we must build a market based on strong governance and transparency. As regulators, we will maintain a zero-tolerance approach to compliance violations,” Cardoso said.

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Banking sector remains robust

Cardoso explained that the banking sector remains robust with key indicators reflecting a resilient system.

“The non-performing loan ratio remains within the prudential benchmark of five percent, showcasing strong credit risk management. The banking sector liquidity ratio comfortably exceeds the regulatory floor of 30 percent, a level which ensures banks are maintaining adequate cash flow to meet the needs of customers and their operations. The recent stress test conducted also reaffirmed the continued strength of our banking system,” he said.

To ensure that Nigeria’s banking system can effectively support the growth of its economy, efforts to strengthen banks’ capital buffers were announced in 2023 with a two-year implementation window.

“I am pleased to note that a significant number of banks have raised the required capital through right issues and public offerings well ahead of the 2026 deadline! I believe that the banking sector is in a strong position to support Nigeria’s economic recovery by enabling access to credit for MSMEs and supporting investment in critical sectors of our economy,” the CBN governor said.

In the same vein, Other Financial Institutions (OFIs) hold significant potential to drive productivity and economic growth by expanding access to credit and financial services for underserved individuals and businesses.

To unlock this untapped potential, the CBN aims to strengthen key institutions—particularly Primary Mortgage Banks (PMBs) and Microfinance Banks (MFBs)—to enhance their efficiency and impact.

The CBN chief explained that the Nigerian payments ecosystem has been ahead of many advanced economies, yet has not always received the recognition it deserves.

He said that many innovations that other countries are only now experiencing have been part of our system for years. We must celebrate these successes, as they contribute to building our global reputation.

“Nigeria’s dynamic fintech ecosystem has driven financial inclusion and positioned the country as a hub of innovation in Africa. Despite a challenging external environment, Nigerian Fintechs continue to shine, attracting significant foreign investment and several have achieved global unicorn status this year,” he stated.

According to him, there is a need to continually leverage this channel to enhance access to finance and credit, particularly for under-served populations.

However, he urged fintech companies and banks to ensure their platforms are not exploited for fraudulent activities.

“Strengthening the KYC onboarding process is essential to prevent malicious actors from exploiting our financial system. Additionally, these institutions must prioritize improving transaction monitoring and bolstering consumer protection measures to ensure that digital channels remain safe, especially for the most vulnerable segments of our population,” he said.

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Recapitalisation of banks to boost economy, strengthen financial stability

The ongoing recapitalisation of banks comes with several benefits to the economy, including helping the lenders take bigger risks by banking underserved markets, Cardoso said at the 2nd International Financial Inclusion Conference in Lagos.

The CBN boss said it was in line with its efforts to deepen financial inclusion, the apex bank introduced new minimum capital requirements for banks.

“This strategic move ensures that banks are well-capitalized, enabling them to take on greater risks, particularly in underserved markets. With stronger capital bases, banks can provide more loans and financial products to Micro Small and Medium Enterprises (MSMEs), rural communities, and other vulnerable segments that have previously struggled to access formal financial services”.

The CBN had on March, 28, 2024 announced a two-year bank recapitalisation exercise which commenced on April 1, 2024, and is expected to end on March 31, 2026.

The recapitalization plan requires minimum capital of N500 billion, N200 billion, and N50 billion for Commercial Banks with International, National, and Regional licenses respectively.

Cardoso said the recapitalisation policy not only strengthens financial stability but also serves as a catalyst for inclusive growth.

With less than 14 months to recapitalisation deadline, banks have stepped up preliminary consultations on the prospect of business combinations.

Analysts said there have been “more talks around mergers and acquisitions” as banks consider alternative options to fresh capital raising. They said while the banks are expected to flood the market with offers, many of them have seen the inevitability of mergers and acquisitions.

The CBN had approved the first mergers and acquisition deal between Providus Bank and Unity Bank in 2024. Access Holdings Plc, Ecobank Nigeria and Jaiz Bank Plc have met the new minimum capital requirements.

The CBN is the final signatory in a tripartite capital verification committee that included the Securities and Exchange Commission (SEC) and Nigeria Deposit Insurance Corporation (NDIC).

Experts had estimated that banks could raise about N5 trillion within the two-year recapitalisation period.

e-payment transactions soar on CBN’s policies

Electronic payment transactions in Nigeria rose to $702.6 billion in 12 months ended December 31, 2024, a report from the Nigeria Interbank Settlement System (NIBSS) showed, reaching an all-time high and the first time to hit the quadrillion mark.

According to NIBSS industry statistics, the value recorded on the NIBSS Instant Payment (NIP) represents a 79.6 per cent increase over the $400.5mn recorded in 2023.

Although the e-payment data shows a steady increase throughout the 12 months of the year, the highest value was achieved in December 2024 because of the high level of business transactions within the month.

Being a festive period with lots of spending activities, Nigerians spent a total of $76.7bn over electronic channels in December 2024. This came as the all-time high monthly record on the NIBSS electronic payment platform.

Also, the volume of transactions processed by NIBSS for the year also jumped from 9.7 billion in 2023 to 11.2 billion in 2024. This represents a 15.5 per cent rise in the volume of electronic transactions year on year.

Stakeholders insist that the surge in e-payment transactions can be linked to the recent cash crunch experience and the cashless policy of the CBN limiting the amount of cash that can be withdrawn daily.

The e-payment transactions are usually carried out through cheques, Automated Teller Machines (ATMs), Point of Sale (PoS), m-Cash, CentralPay, Remita, Nigeria Interbank Instant Payment (NIBSS) Instant Payment (NIP), mobile money, among other channels.

The e-payment powers were conferred on the CBN by Sections 2 (d) and 47 (2) of the CBN Act, 2007, to promote and facilitate the development of efficient and effective systems for the settlement of transactions, including the development of electronic payment systems.

While pushing for the full use of the e-payment system, the CBN said for Nigeria to actively play at the world stage, “our payment system must be successfully benchmarked against the global best practices, as in most developed nations of the world”.