Survival pressure rises on Tier-2 banks as recapitalisation

By Chinwendu Obienyi

Nigeria’s Tier-2 (mid-tier) banks are scrambling to shore up their balance sheets as the Central Bank of Nigeria’s (CBN) March 2026 recapitalisation deadline looms, triggering what analysts expect to be the biggest wave of consolidation since the landmark reforms of 2004.

Tier-2 banks have smaller capital bases and more modest operations, yet play a vital role in the Nigerian financial system.

Under the new directive, international banks are required to raise their minimum paid-up capital to N500 billion, national banks to N200 billion and regional banks to N50 billion. The order, announced in 2024, is designed to strengthen the sector’s resilience, attract foreign investment and position the industry to support Nigeria’s ambition of becoming a $1 trillion economy.

However, a report titled; Capital, Competition, and Consolidation: How Nigeria’s Tier-2 banks are responding to the CBN’s 2026 recapitalisation order by SBM Intelligence, a geopolitical research and consulting firm, revealed on Monday that pressure is mounting on tier-2 institutions amid record-breaking results from their larger tier-1 rivals.

Specifically in 2024, Zenith Bank reported an 86 per cent year-on-year surge in gross earnings to N3.97 trillion and a 67 per cent increase in profit before tax to N1.3 trillion. Access Holdings and FBN Holdings also posted strong performances, consolidating Tier-1 dominance in the market.

“These numbers underscore the widening gulf between Tier-1 banks and their mid-tier counterparts. The recapitalisation order is not just a compliance exercise, it’s a survival test for Tier-2 banks”, the report said.

Already, the likes of FCMB, Fidelity Bank, Stanbic IBTC, Sterling Bank and Wema Bank have already moved to raise fresh capital through public offers, rights issues, private placements, and strategic divestments. While some are ahead of the curve, others face the stark prospect of mergers or acquisitions if they fail to meet the new thresholds.

The report noted that FCMB has posted robust earnings growth, while Fidelity has delivered exceptional capital market performance and Wema continues to drive a digital-led transformation, adding that these results show adaptability.

However, SBM warned that higher funding costs and volatile macroeconomic conditions remain key risks.

“Recent performance trends suggest that Tier-2 banks are not standing still. Industry watchers expect the coming months to see a surge in mergers and alliances among Tier-2 players as they seek to achieve scale. Larger combined entities would be better positioned to compete with Tier-1 institutions, expand access to credit, and invest in innovation.

Still, consolidation brings risks. Integration hurdles, job cuts, and the marginalisation of smaller players could destabilise the sector if not carefully managed. The recapitalisation drive will make banks stronger, but it won’t be painless”, the report said.

Looking forward, industry consolidation appears inevitable. Mergers and alliances will likely produce larger, more competitive institutions, fostering innovation and expanding credit access. However, careful management will be required to avoid marginalising smaller players and to address integration risks.

“In conclusion, Nigeria’s Tier-2 banks are at a critical juncture. Their ability to raise capital, embrace technology, and execute bold strategies will determine their future relevance in an industry on the brink of transformation. With proactive leadership, these institutions are positioned to play a central role in shaping a more robust, inclusive, and globally competitive Nigerian banking sector”, the report said.

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