• Mergers, acquisitions snagged by governance issues
• Politicians using recapitalisation to expand stakes, says Owoh
Barely six months to the close of the Central Bank of Nigeria’s (CBN) recapitalisation window, more than 10 mid-tier and marginal banks are facing severe hurdles in their bid to raise fresh capital, with growing investor fatigue and the rising appeal of the insurance industry threatening to derail their fundraising campaigns.
The Guardian learnt at the weekend that the stiff competition for funds, now worsened by the entrance of insurance companies into the market, has raised investors’ bargaining power and forced many to reconsider earlier commitments to banks. Some operators now fear that the tide could leave them stranded, with possible outcomes ranging from forced mergers to outright liquidation.
Talks of mergers and acquisitions, once seen as a safety net, are reportedly stalling due to wide gaps in corporate governance practices, risk appetites, and disclosure requirements. Sources disclosed that lack of clarity on liabilities and weak leadership at negotiation tables have further complicated matters, heightening fears of last-minute forced mergers that could wipe out corporate legacies and expose new entities to undisclosed risks.
A precedent often cited is Fidelity Bank’s inherited $3 million credit liability from the defunct FSB International Bank after the 2005 consolidation, an example of how legacy issues can haunt post-merger survival.
Meanwhile, the CBN has reiterated its March 2026 deadline for recapitalisation, with Governor Yemi Cardoso revealing at the last Monetary Policy Committee (MPC) meeting that eight banks had already met the new threshold. About 10 others are reportedly at advanced stages of compliance, but several remain trapped in fundraising uncertainties.
Adding to the pressure is the insurance industry’s recapitalisation programme, which has triggered an unprecedented surge in investor appetite for insurance equities. Following the enactment of the Nigerian Insurance Industry Reform Act (NIIRA) 2025, insurance stocks have soared by over 60 percent in two weeks, attracting institutional and foreign investors who see stronger growth prospects in the sector compared to the more saturated banking industry.
Industry experts suggest that this shift could siphon critical capital away from banks just when they need it most. “Inquiry calls about insurance firms have intensified since NIIRA was signed into law,” an investment banker told The Guardian.
Yet, Professor Godwin Owoh, a monetary policy expert, has cast doubts on the integrity of the recapitalisation exercise, insisting that it merely opens the door for politicians to consolidate their stakes in financial institutions. According to him, regulators lack the capacity and political will to block illicit inflows disguised as legitimate investments.
“The recapitalisation process has become a channel for laundering public funds through proxies,” Owoh said, warning that without addressing corruption, insider trading, and systemic weaknesses, the recurring erosion of capital in Nigeria’s financial system would persist.
As banks race against time to meet the March 2026 deadline, analysts say the dual recapitalisation of the banking and insurance sectors may reshape the financial landscape but not without casualties. For weaker lenders, survival may hinge on swift and transparent fundraising or the inevitability of mergers that could alter the banking map for years to come.
