Capital market activity is expected to remain elevated in the months ahead as Nigerian banks intensify efforts to meet the Central Bank of Nigeria’s (CBN) recapitalisation deadline of March 2026, according to a new outlook by Coronation Asset Management.
In its Year in Review and 2026 Outlook, the investment firm notes that the ongoing recapitalisation exercise has emerged as the defining theme for the banking sector, reshaping balance sheets and driving a wave of rights issues, public offers and private placements. The CBN has indicated that 16 banks have already met the revised capital requirements, while the remaining institutions are expected to close the gap as the deadline approaches.
The report observes that the recapitalisation push, combined with banks’ exit from the CBN’s regulatory forbearance framework, significantly influenced sector performance in the latter half of the year. While investor sentiment remained uneven—contributing to banking stocks underperforming the broader market—the process is expected to strengthen capital buffers and support a return to more sustainable, core banking earnings by 2026.
Most Tier-1 banks and several Tier-2 institutions, including GTCO, Zenith Bank, UBA, Stanbic IBTC, Jaiz Bank and Access Holdings, have already concluded their capital-raising programmes. Others such as FCMB, FBN Holdings, Fidelity Bank and Sterling Financial Holdings have secured regulatory approvals for additional offers that are either underway or in the pipeline. With roughly three months remaining before the deadline, Coronation anticipates further capital market transactions and final decisions on outstanding capital-raising plans.
Despite regulatory headwinds, the banking sector demonstrated resilience through 2025, supported by balance sheet growth and adequate liquidity. However, headline profitability moderated from the exceptional levels recorded in the previous year. Industry pre-tax profit rose by 5.2 per cent year-on-year, reflecting the combined effects of higher funding costs, rising loan-loss provisions, elevated operating expenses amid persistent inflation, and new regulatory measures such as the windfall tax on foreign exchange gains.
The increase in impairments was driven largely by manufacturing and trade-related exposures, as import-dependent borrowers grappled with tighter foreign exchange access and higher input costs. In contrast, upstream oil and gas exposures showed relative strength, benefiting from firmer crude prices and improved cash flows. Downstream oil and power sector loans, however, continued to face pressure due to rising receivables and delayed tariff adjustments.
Equity market performance mirrored this mixed picture. The NGX Banking Index gained over 30 per cent year-to-date but lagged the NGX All-Share Index, which rose by more than 50 per cent. Large-cap banks such as Zenith Bank, GTCO, Ecobank Transnational and UBA recorded solid gains on the back of strong earnings fundamentals, sound capital positions and dividend payouts. Mid-tier banks outperformed in several cases, with Wema Bank and Stanbic IBTC posting notable rallies, driven by improving profitability and investor rotation into value stocks. Access Holdings underperformed, weighed down by delays in earnings releases and uncertainty surrounding dividends.
Looking ahead, Coronation Asset Management expects a more supportive operating environment in 2026, underpinned by anticipated policy rate cuts, improving inflation trends and better foreign exchange liquidity. These factors are expected to ease funding pressures, stimulate lending activity and support a gradual recovery in interest income.
While lower yields may compress margins, the firm believes stronger core earnings, expanding loan books and enhanced capital flexibility will underpin profitability and balance sheet growth. With much of the regulatory clean-up completed and capital buffers improving, the banking sector is viewed as well positioned to scale lending, support investment activity and emerge as a key driver of economic growth over the medium term.