May 18, (THEWILL) — Investment banking and research firm, Chapel Hill Denham, has raised concerns over the Central Bank of Nigeria’s (CBN) banking structure, saying the current framework places Nigerian lenders at a disadvantage, while giving foreign banks and financial technology firms greater operational flexibility.
In a report titled “The Nigerian Banking Paradox: High Returns, Deep Discounts”, the firm said Nigeria’s supervisory model forces local banks to maintain significantly larger capital buffers to support international operations across Africa.
According to the report, Nigeria’s framework differs from the “segregation model” used in several African countries, where domestic and foreign banking operations are supervised separately and ring-fenced from parent institutions.
Under the Nigerian model, all international operations are consolidated into the Nigerian parent bank, giving the CBN full oversight of the banking group.
While this structure improves regulatory visibility and reduces supervisory gaps, Chapel Hill Denham noted that it also imposes heavy compliance, reporting, and capital requirements on Nigerian lenders.
The report highlighted what it described as an “unlevel domestic playing field”, noting that foreign banks operating in Nigeria can establish local subsidiaries with a minimum capital base of ₦200 billion, the same threshold applicable to domestically focused institutions.
However, Nigerian banks seeking international licences are required to maintain ₦500 billion in capital, creating a ₦300 billion gap that foreign competitors can deploy into more profitable business operations.
According to the firm, Nigerian banks are also compelled to over-capitalise subsidiaries in other African markets, even when local regulatory requirements are lower.
Chapel Hill Denham further identified structural constraints within Nigeria’s Financial Holding Company framework and the Companies and Allied Matters Act, warning that restrictions under the Banks and Other Financial Institutions Act (BOFIA) limit cross-border expansion.
The report added that the CBN’s 50 percent Cash Reserve Ratio policy continues to weaken profitability by sterilising a significant portion of customer deposits without interest payments.
Despite these challenges, the firm noted that Nigerian banks remain among Africa’s strongest performers in terms of return on equity and regional market expansion.
Ogochukwu Onwaeze is a writer specializing in business and economic journalism. At THEWILL News Media, she translates market trends, financial developments, and policy shifts into clear and engaging stories.
