POLITICS TODAY

By Nasir Dambatta

The Central Bank of Nigeria (CBN), under the leadership of Governor Olayemi Cardoso, is reinforcing its commitment to a resilient and well-regulated financial system through stringent compliance measures, risk management frameworks, and a decisive push for bank recapitalisation. These efforts are aimed at fortifying Nigeria’s financial sector against emerging global challenges while ensuring its stability and credibility at home and abroad.

Strengthening Compliance and Risk Management

As part of its regulatory agenda, the CBN recently hosted a high-level compliance and Anti-Money Laundering (AML) training workshop in Lagos, in collaboration with Citi. The workshop 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, underscored the importance of dynamic, risk-based AML measures in safeguarding the financial system. “Regulators expect financial institutions to maintain 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,” Phillips stated.

Citi’s Correspondent Banking Group Managing Director, Siobhan Ni Ealaithe, also stressed the importance of robust governance frameworks, highlighting Know Your Customer (KYC), Know Your Business (KYB), and Know Your Transaction (KYT) protocols as essential tools for combating illicit financial activities.

Similarly, Stephanie Bailey, Head of EMEA AML Risk Management for Foreign Correspondent Banking, provided a stark assessment of financial crime risks, revealing that over $3 trillion in illicit funds flow through the global financial system annually. She urged financial institutions to strengthen due diligence measures and leverage technology-driven risk assessments to enhance transparency.

Upholding Market Integrity and Banking Ethics

Governor Cardoso has consistently emphasized the importance of ethics and professionalism in Nigeria’s banking sector. He recently reiterated that the CBN has intensified surveillance of market activities to ensure compliance and eliminate bad actors seeking to undermine the system.

“At the Central Bank, we have intensified market surveillance to ensure compliance and eliminate bad actors. Together, we must build a financial market based on strong governance and transparency,” Cardoso stated, adding that the apex bank will maintain a zero-tolerance approach to compliance violations.

The governor also reinforced the role of the FX Global Code, a set of global principles for the foreign exchange market, which has been mandated for all authorized dealers and market participants to uphold best practices in the financial system.

Banking Sector Resilience and Recapitalisation Push

Despite global economic uncertainties, Nigeria’s banking sector remains robust, with key indicators reflecting a resilient system. The CBN has maintained a non-performing loan (NPL) ratio within the prudential benchmark of 5 percent, demonstrating strong credit risk management. Additionally, the banking sector’s liquidity ratio exceeds the 30 percent regulatory threshold, ensuring banks have sufficient cash flow to meet operational and customer demands.

To bolster financial stability, the CBN announced a bank recapitalisation plan in 2023, with a two-year implementation period ending in March 2026. The policy requires banks to raise their capital base to:

• N500 billion for banks with international licenses
• N200 billion for banks with national licenses
• N50 billion for banks with regional licenses

Cardoso noted that many banks have already raised the required capital through rights issues and public offerings ahead of the deadline. The move, he said, ensures that Nigeria’s financial sector is well-positioned to support economic growth by providing more credit access to Micro, Small, and Medium Enterprises (MSMEs) and other underserved segments.

The recapitalisation drive has also accelerated talks of mergers and acquisitions within the banking sector. Analysts predict that Nigerian banks could raise up to N5 trillion within the two-year recapitalisation period. Already, the CBN has approved the first merger deal between Providus Bank and Unity Bank, while Access Holdings Plc, Ecobank Nigeria, and Jaiz Bank Plc have met the new capital requirements.

Strengthening Other Financial Institutions and the Digital Payment Ecosystem

Beyond commercial banks, the CBN is also strengthening Other Financial Institutions (OFIs), including Primary Mortgage Banks (PMBs) and Microfinance Banks (MFBs), to expand financial services to underserved individuals and businesses.

Governor Cardoso noted that Nigeria’s fintech ecosystem remains one of the most dynamic in Africa, driving financial inclusion and attracting significant foreign investments. He highlighted that several Nigerian fintech companies have achieved global unicorn status, reflecting the sector’s growth.

However, he cautioned that fintech platforms must not be exploited for fraudulent activities. “Strengthening the KYC onboarding process is essential to prevent malicious actors from exploiting our financial system,” he stated, urging financial institutions to improve transaction monitoring and consumer protection measures.

E-Payment Transactions Surge to $702.6 Billion

CBN policies on financial inclusion and cashless transactions have led to an unprecedented rise in electronic payment transactions, which soared to $702.6 billion in 2024—an 80 percent increase from the previous year, according to the Nigeria Interbank Settlement System (NIBSS).

The December 2024 festive period saw a record-breaking $76.7 billion in e-payment transactions, the highest ever recorded in a single month on the NIBSS Instant Payment (NIP) platform. The total volume of transactions also surged from 9.7 billion in 2023 to 11.2 billion in 2024, marking a 15.5 percent year-on-year growth.

Industry stakeholders attribute this surge to the CBN’s cashless policy, which limits cash withdrawals and encourages digital transactions across ATMs, Point of Sale (PoS) terminals, mobile money platforms, and online banking systems.

Governor Cardoso emphasized that for Nigeria to remain competitive on the global stage, its payment systems must be benchmarked against global best practices. He reaffirmed the CBN’s commitment to building a secure, efficient, and technology-driven financial ecosystem.

Conclusion

With less than 14 months to the recapitalisation deadline, Nigerian banks are accelerating capital-raising efforts, with many opting for mergers and acquisitions to meet regulatory requirements. The CBN’s stringent compliance measures, recapitalisation drive, and push for digital innovation signal a transformative shift in Nigeria’s financial landscape.

As the country navigates evolving global financial risks, the CBN’s proactive regulatory approach ensures that Nigeria’s banking sector remains strong, resilient, and well-positioned to drive economic growth and financial inclusion.