July 26, (THEWILL) — Barely three months after Nigerian banks concluded one of the largest recapitalisation exercises in the country’s financial history, investors are confronting the possibility of another capital call.
On June 10, 2026, the Central Bank of Nigeria (CBN) published the “Exposure Draft of the Revised Guidelines for Licensing and Regulating Financial Holding Companies in Nigeria”, proposing a sweeping overhaul of the way financial holding companies (HoldCos) are capitalised. Signed by Dr. Rita I. Sike, Director of the Financial Policy and Regulation Department, the proposal would require HoldCos to maintain standalone capital equivalent to the combined regulatory capital of all their subsidiaries plus an additional 20 percent buffer.
While the proposal is designed to strengthen financial stability and align Nigeria’s regulatory framework with international standards, analysts say it could create an estimated N1.74 trillion capital shortfall across the banking sector, forcing several of the country’s largest financial groups back to the equity market only months after shareholders injected N4.65 trillion to meet the CBN’s banking recapitalisation programme.
The proposal therefore presents investors with an uncomfortable question: can Nigeria build a stronger banking system without eroding shareholder value?
The CBN’s argument is rooted in lessons from previous banking crises. The regulator believes that although commercial banking subsidiaries may appear adequately capitalised, their parent holding companies often operate with relatively thin standalone capital while supervising businesses spanning pensions, insurance, asset management, payments and fintech. During periods of financial stress, problems within non-bank subsidiaries could weaken the parent company and eventually threaten the banking subsidiary itself.
The proposed framework seeks to eliminate this vulnerability by ensuring that holding companies have sufficient capital of their own, rather than relying indirectly on the capital already sitting inside their banking subsidiaries. The proposal also addresses the long-standing issue of “double-gearing”, where the same capital effectively supports both the parent company and its subsidiaries. By requiring a separate parent-level capital cushion, the CBN hopes to ensure that holding companies genuinely serve as a source of financial strength rather than becoming an additional source of systemic risk.
Few analysts dispute the regulatory logic behind the proposal. The concern instead centres on its timing.
The banking industry only recently completed an intensive recapitalisation cycle launched by the CBN under Governor Olayemi Cardoso. Banks collectively mobilised approximately N4.65 trillion through rights issues, public offers and private placements after the apex bank increased minimum capital requirements to as much as N500 billion for internationally licensed commercial banks. Importantly, the regulator prohibited the use of retained earnings and reserves in meeting those requirements, forcing institutions to raise fresh equity from investors.
The new HoldCo proposal could require many of the same investors to return to the market once again.
According to Renaissance Capital’s analysis, Access Holdings faces the largest estimated funding requirement, exceeding N500 billion, while UBA and FBN Holdings are also expected to require substantial fresh capital if the proposal is implemented in its current form. Other financial holding companies, including GTCO, FCMB Group, Stanbic IBTC Holdings, Sterling Financial Holdings and Zenith Bank Plc, could also face varying capital gaps, although some appear significantly better positioned than others.
For shareholders, the biggest concern is not simply raising more capital but what that capital raising could mean for ownership and future returns.
Every time a company issues additional shares, the total number of shares outstanding increases. Existing investors who do not participate proportionately in the new offering own a smaller percentage of the company than before. This process, known as dilution, reduces voting power and spreads future earnings across a larger shareholder base.
Unless profits rise quickly enough to offset the expanded share count, earnings per share and dividend per share inevitably come under pressure.
This explains why some equity analysts believe the proposal could trigger a period of subdued returns for banking investors despite strengthening the industry’s overall resilience. Agusto & Co. argues that while the earlier recapitalisation exercise strengthened commercial banking subsidiaries, it left parent holding companies exposed to structural leverage. Closing that loophole should improve long-term stability but is likely to weigh on return on equity and dividend yields in the near term.
That trade-off is reflected across the sector. Holding companies may emerge with stronger balance sheets, but a larger equity base means profitability ratios could weaken until newly raised capital begins generating meaningful returns. Since regulatory capital buffers are typically invested conservatively rather than deployed aggressively into high-yield assets, shareholders may experience a period of lower returns even if institutions become financially safer.
International experience suggests the CBN’s direction is not unusual.
In the United States, bank holding companies operate under the Federal Reserve’s “Source of Strength” doctrine, which requires parent companies to maintain sufficient financial capacity to support their banking subsidiaries during periods of distress. The United Kingdom similarly applies consolidated prudential requirements that limit double-gearing within financial groups, while India’s Reserve Bank requires large banking groups to maintain separate capital under its Non-Operative Financial Holding Company framework. South Africa also imposes prudential oversight on financial conglomerates through its Twin Peaks regulatory model.
Viewed against these frameworks, Nigeria’s proposal represents an effort to bring domestic regulation closer to international practice rather than introducing an entirely new concept. The immediate market implications, however, are likely to depend on how investors assess each institution’s ability to absorb the new requirements.
Banks with relatively small capital gaps may continue attracting investor interest because they are less likely to require substantial new equity issuance. Those facing larger shortfalls could encounter greater pressure as investors weigh the possibility of future dilution against the long-term benefits of stronger capital structures.
Analysts at CardinalStone expect increasing differentiation within the banking sector, with investors favouring institutions requiring limited additional capital while becoming more cautious toward groups facing significant funding gaps. Renaissance Capital similarly argues that excluding retained earnings from the proposed buffer substantially increases execution risk by forcing institutions back into primary capital markets.
Fitch Ratings also sees a longer-term benefit. The agency notes that stronger parent-level capital requirements reduce contagion risks within financial groups and better align Nigeria’s supervisory framework with global prudential standards. However, it also acknowledges that repeated capital raising could create short-term pressure on shareholder returns and market valuations.
Ultimately, the CBN’s proposal reflects a classic regulatory dilemma.
The reforms promise a more resilient financial system, stronger depositor protection and reduced systemic risk by ensuring that holding companies possess independent financial strength. Yet those same safeguards may come at a significant cost to existing investors, who have only recently financed an industry-wide recapitalisation exercise and could soon be asked to do so again.
Whether the proposal proceeds unchanged after stakeholder consultations remains uncertain. What is already clear, however, is that the debate has shifted beyond how much capital Nigerian banks need. It is now about who should bear the cost of making the financial system safer.
If the CBN proceeds with the framework in its current form, the next chapter in Nigeria’s banking reforms may be defined less by regulatory compliance than by the willingness of investors to once again write billion-naira cheques in exchange for the promise of a stronger, more stable financial sector.
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.
