Recapitalisation: CBN Directs Banks to Begin Stress Tests April 1

The Central Bank of Nigeria (CBN) has directed all commercial banks to conduct stress tests from April 1, 2026, as the March 31 recapitalisation deadline approaches.

In a letter dated March 6, the apex bank said the tests will assess banks’ resilience under extreme economic conditions such as recession, commodity price shocks, and foreign exchange volatility.

The directive aligns with the Bank and Other Financial Institutions Act (BOFIA) 2020, which requires banks to maintain adequate capital to cover risks. “Banks are expected to stress the resilience of their credit portfolio over 12 months,” the CBN stated.

The tests will estimate impacts on non-performing loans, loan loss provisions, and capital adequacy ratios (CAR). Insider-related exposures will be treated under severe stress assumptions and assumed to be in default.

Banks must report pre-stress and post-stress CAR, as well as any capital shortfall. Institutions will be required to raise 100% of their stressed shortfall or 50% of the CBN’s computed shortfall, whichever is higher, within 18 months.

Meanwhile, data shows Nigerian banks deposited ₦61.1 trillion with the CBN in February 2026, a 16.2% increase from January, reflecting excess liquidity but cautious lending. Borrowing through the Standing Lending Facility declined to ₦1.03 trillion.

Analysts say the trend highlights banks’ preference for safety amid elevated interest rates and credit risk concerns. “Banks naturally gravitate toward the relative safety of the SDF window,” said investment banker Tajudeen Olayinka.

The CBN noted that the stress testing framework and liquidity patterns underscore the need for stronger governance, transparency, and risk management as the sector prepares for recapitalisation.