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 contained 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 critical to 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 CBN said in the report.
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 apex bank said, noting that such conditions could disrupt financial intermediation and weaken market confidence.
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