With just over two and a half months left until the recapitalisation deadline, Nigerian lenders are edging toward a defining moment, with consolidation increasingly viewed as unavoidable for several lenders.
As of January 2026, approximately 22 out of 34 licensed commercial banks have reached or surpassed the apex bank’s benchmark, which is roughly 65 percent compliance rate.
Read also: Here are 21 banks that have met the new CBN capital rules
While the largest banks have completed their recapitalisation programmes, the pressure has pivoted to Tier-2 and Tier-3 banks. DataPro’s recent outlook points to at least three potential mergers among mid-tier banks.
“Past consolidation efforts, such as those in 2005, highlight the potential pitfalls of IT system failures and cultural clashes. Particularly challenging is the merger of conservative Tier-1 banks with aggressive Tier-2 acquirers, which could cause decision-making gridlock and operational disruptions,” said Idris Shittu, an analyst expert on enterprise risk management for DataPro.
Rising interest rates, persistent inflation, and subdued liquidity have made standalone capital raising more expensive and less predictable. For smaller banks without strong retail franchises or diversified income streams, mergers are increasingly seen as the least disruptive route to survival. Yet consolidation comes with trade-offs.
“This regulatory push has spurred an active M&A environment, but it brings with it considerable risks. Post-merger integration challenges, including IT system harmonisation, cultural alignment, and the migration of Non-Performing Loans, could strain newly merged entities, especially among smaller banks. The looming deadline has also sparked ‘War Room’ discussions focused on deal execution and risk mitigation.”
Read also: CBN banks on growth, disinflation to lock in financial sector reform gains
As banks reposition, the sector faces what DataPro characterises as a convergence of three structural pressures:
First is regulatory tightening. Nigeria’s 45 percent Cash Reserve Ratio continues to constrain liquidity, effectively locking away a significant share of banks’ deposits and limiting balance sheet flexibility.
Second is execution risk. Mergers bring challenges around asset quality, governance alignment, and technology integration. The Punch has previously reported concerns among analysts that poorly aligned mergers could expose acquiring banks to hidden non-performing loans.
Third is technological disruption. Fintech operators such as Moniepoint and Opay are steadily eroding banks’ dominance in payments and SME banking. Shittu warned that traditional lenders risk losing younger customers unless they accelerate digital innovation.
There is expected to be a shift in how Nigerian banks compete. Rather than operating solely as financial intermediaries, many are exploring platform-based models that embed lifestyle and commerce services into banking apps.
Read also: How Nigeria’s big banks scaled recapitalisation hurdle ahead March
To bridge the gap, banks are increasingly weighing fintech acquisitions or the creation of standalone digital subsidiaries designed to operate outside traditional banking bureaucracy.
By the end of 2026, the number of licensed banks is expected to shrink, resulting in a more concentrated but better-capitalised industry. If executed well, consolidation could strengthen the sector’s ability to fund large-scale projects and support Nigeria’s long-term growth ambitions.