The Central Bank of Nigeria (CBN) has cautioned that the ongoing banking sector recapitalisation could increase concentration risk in Nigeria’s capital market, potentially crowding out non-bank issuers, despite the current bullish momentum in equities.
The warning is detailed in the Macroeconomic Outlook for Nigeria, 2026: Consolidating Macroeconomic Stability Amid Global Uncertainty, where the apex bank highlighted emerging vulnerabilities across the financial system.
According to the CBN, the recapitalisation exercise, while crucial for strengthening banks’ balance sheets and enhancing resilience, may skew investor attention disproportionately towards the banking sector.
“Despite the bullish momentum, the capital market could face higher concentration risk from the banking sector, as the ongoing recapitalisation could trigger investor fatigue and crowd out other issuers,” the report stated.
The Bank explained that increased capital-raising activities by deposit money banks could limit funding access for corporates outside the financial sector, particularly as banks dominate equity issuance during the recapitalisation window.
While recent improvements in capital adequacy and liquidity ratios provide buffers for banks, the CBN warned that these gains remain vulnerable to adverse macroeconomic developments.
“An increase in credit losses or foreign exchange illiquidity could erode capital reserves, breach prudential thresholds, and strain liquidity coverage,” the report noted, adding that such conditions could disrupt financial intermediation and weaken market confidence.
The CBN also flagged rising non-performing loans as a medium-to-high risk to the banking system, warning that asset quality deterioration could weaken earnings and amplify systemic vulnerabilities.
In addition, exchange rate volatility was identified as a key risk factor, with the apex bank stating that a sharp naira depreciation, though unlikely, could negatively affect banks’ balance sheets and liquidity positions, expand monetary aggregates, and heighten inflationary pressures.
Beyond financial risks, the CBN raised concerns about cybersecurity threats, citing the high level of interconnectedness within the economic system.
“The high degree of interconnectedness among financial institutions creates a systemic susceptibility, where cyberattacks could propagate data breaches, compromise confidential information, and erode public confidence in the financial system,” the report warned.
On the fiscal side, the bank cautioned that Nigeria’s 2026 budgetary outlook remains vulnerable to oil price and production shocks, given that oil revenue is projected to account for over 57 per cent of total government revenue.
While prospects for non-oil revenue hinge on the successful implementation of the Nigeria Tax Act, 2025, the CBN warned that weak tax compliance, low awareness, and gaps in tax administration could undermine revenue performance.
The apex bank concluded that sustaining macroeconomic stability amid global uncertainty will require coordinated policy actions to manage financial sector risks, strengthen public finance management, and ensure balanced capital market development beyond the banking sector.
Emman Tochi ✔
Emma Tochi is Naija247news Media Northern Bureau Chief, he's based in FCT Abuja. He overseas the northern operations of this business media
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