CBN tightens oversight on banks

By Philippine Duru

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Nigeria’s apex bank has signalled a tougher regulatory stance on lenders following the completion of a sweeping recapitalisation exercise, as it moves to strengthen corporate governance, rebuild investor confidence, and safeguard financial system stability.

Speaking at the Chartered Institute of Directors Nigeria’s induction ceremony in Lagos, Governor of the Central Bank of Nigeria, Olayemi Cardoso—represented by the Director of Banking Supervision, Olubukola Akinwunmi—said the regulatory focus has shifted from capital raising to enforcing discipline across bank boards and executive management.

Cardoso described the recapitalisation programme as a “strategic imperative,” aimed at strengthening the resilience of financial institutions and positioning them to support sustainable economic growth. He emphasised, however, that stronger balance sheets must now be matched with stricter governance standards.

“The role of directors becomes even more critical in this new phase,” he said, noting that stewardship must prioritise consolidation, confidence, and stability.
The move reflects a broader pivot by the apex bank toward tighter oversight following a period marked by governance lapses and regulatory interventions. In January 2024, the Central Bank dissolved the boards and management of three banks over serious breaches, underscoring its readiness to act decisively where financial stability is at risk.

Since then, regulators have introduced a series of measures targeting accountability and transparency in bank leadership. These include a directive requiring systemically important banks to obtain regulatory approval for incoming chief executives at least six months before transitions, as well as mandatory public announcements of successors three months in advance—steps aimed at preventing leadership gaps.
The apex bank has also tightened restrictions on related-party lending to curb insider abuses, while reinforcing expectations around board independence, transparency, and disclosure of financial and governance information.

“These measures are not punitive,” Cardoso said. “They are enabling, providing directors with the framework to exercise stewardship with discipline, foresight and confidence.”
A key feature of the post-recapitalisation framework is the introduction of risk-based capital requirements, which align banks’ capital levels more closely with their risk exposures. This marks a shift from earlier regulatory forbearance toward a more rules-based supervisory approach.

Under the new regime, bank directors are expected to take greater responsibility for aligning capital planning with risk exposure, strengthening oversight of credit, market, and operational risks, and ensuring compliance without relying on regulatory leniency.
The Central Bank said the reforms are designed to embed risk awareness into strategic decision-making, ensuring that recapitalisation translates into genuine financial stability rather than simply expanding balance sheets.

Beyond capital requirements, regulators are placing increased emphasis on governance structures, including annual board evaluations, structured succession planning, and stricter “fit and proper” criteria to ensure only individuals with the required integrity and competence oversee financial institutions.

The renewed focus comes as Nigeria’s banking sector faces a more complex environment shaped by economic reforms, technological disruption, and evolving customer expectations. Regulators say this demands more proactive and accountable boards capable of balancing profitability with long-term sustainability.

Cardoso urged directors to move beyond passive oversight and become “active stewards,” guiding institutions through economic cycles while maintaining ethical standards and protecting stakeholder interests.
“As directors, your responsibilities extend beyond boardrooms,” he said. “The choices you make will shape the future of Nigeria’s economy.”
The Central Bank’s post-recapitalisation push is expected to extend beyond the banking sector, raising governance standards across corporate Nigeria as stricter rules on disclosure, accountability, and risk management take hold.