Nigerian commercial banks began raising capital in 2024 to comply with the Central Bank of Nigeria’s (CBN) new capitalisation requirements and while tier-1 banks have raised over ₦1 trillion on the stock market, smaller banks are considering mergers and acquisitions to meet the March 31, 2026 deadline.
At least three commercial banks, including Polaris and Keystone, are currently exploring potential mergers, according to multiple people familiar with the matter. These discussions are still in the early stages, and while the exact capital requirements for these banks remain unclear, both banks need to raise additional funding after the CBN raised capital requirements tenfold in March 2024.
Polaris Bank had a capital base of ₦50.43 billion according to its 2022 financial statements. To meet the new ₦200 billion capital requirement for national banks, it will need to raise ₦150 billion. The exclusion of retained earnings from qualifying capital adds an additional hurdle for banks in meeting the new regulations. While Keystone Bank’s financial statements are not publicly available, it is expected to face a similar challenge.
Polaris Bank did not immediately respond to a request for comments.
Keystone Bank did not immediately respond to a request for comments.
Mergers have historically been a common solution to bank recapitalisation efforts, and this trend is expected to continue. In August 2024, the CBN approved a merger between Unity Bank and Providus Bank, creating a new entity with a balance sheet of up to ₦3 trillion. The last major recapitalization in Nigeria, in 2004, reduced the number of banks from 89 to 25.
Credit ratings agency Moody’s expects the new capital requirement rules to “drive significant consolidation within the sector.” KPMG noted that while concerns such as loss of identity, ownership dilution, and cultural mismatches make mergers less attractive, several banks will inevitably have to pursue this option to meet the new capital requirements.
A merger could offer a strategic lifeline for Polaris and Keystone, both of which have faced significant regulatory challenges. In January 2024, the Central Bank of Nigeria (CBN) sacked the board of directors of Union, Keystone, and Polaris banks, citing infractions ranging from “regulatory non-compliance to corporate governance failure.” A special investigation into the banks’ ownership claimed former CBN governor Godwin Emefiele allegedly acquired Union Bank and Keystone through proxies with “ill-gotten wealth.”
For the CBN, Nigeria’s macroeconomic challenges have highlighted the need for “stronger and more resilient banks” that can help the country reach its goal of a $1 trillion economy by 2030, a key priority for President Bola Ahmed Tinubu’s administration. Banks with larger capital bases will be better equipped to extend more credit to individuals and businesses.
Nigeria’s biggest banks including Guaranty Trust, Access Bank, and Zenith Bank have raised fresh capital to meet the regulatory requirements. On January 6, GTCO, a Nigerian banking group with a market capitalisation of ₦1.71 trillion, raised ₦209 billion in the first phase of its recapitalisation plan. Zenith Bank, another tier-1 lender, raised ₦350.4 billion through a rights issue and public offer.
