Professor of Accounting at Lead City University, Godwin Oyedokun, has explained that a successful conclusion of the Central Bank of Nigeria’s recapitalization program will not translate to real sector growth.
Oyedokun disclosed this in an interview with DAILY POST on Wednesday.
Recall that the apex bank on Wednesday announced the conclusion of its recapitalization program, which began in March 2024 and ended 31st March, 2026.
In a statement by CBN, 33 banks successfully met their respective capital requirements.
The apex bank said that the program raised N4.65 trillion to strengthen the country’s financial sector.
Reacting, Prof. Oyedotun commended the programme but cautioned against overestimating the impact of recapitalization alone on credit access.
“It is important not to overstate what recapitalization alone can achieve.
“Stronger capital bases do not automatically translate into increased lending to SMEs and informal sector operators,” he stated.
He explained that banks’ lending decisions are driven largely by risk considerations rather than capital levels.
“Banks are fundamentally risk-driven institutions, and their lending decisions are influenced more by credit risk, information asymmetry, collateral constraints, and macroeconomic uncertainty than by capital adequacy alone,” he said.
Oyedokun noted that the long-standing challenge of limited access to credit for SMEs and informal businesses is unlikely to be fully addressed by the recapitalization exercise.
“Many of these enterprises lack formal financial records, acceptable collateral, and credit histories, making them high-risk borrowers under conventional banking models,” he explained.
He further pointed out that even well-capitalized banks may continue to favor safer investment options.
“Even well-capitalized banks may prefer to invest in low-risk government securities or lend to large corporates rather than extend credit to smaller, riskier segments,” he added.
According to him, to ensure that recapitalization translates into real sector growth, there is a need for complementary reforms and policy interventions.
“For recapitalization to translate into real sector growth, it must be complemented by structural and policy interventions,” he said.
He stressed the need for “credit guarantee schemes, improved credit information systems, and strengthened collateral registries” to de-risk SME lending.
The economist also highlighted the importance of development finance institutions and innovation in expanding access to finance.
“Development finance institutions and targeted intervention funds can play a catalytic role in bridging the financing gap.
“In addition, financial innovation, particularly digital lending and fintech partnerships, can help banks reach underserved segments more efficiently,” he noted.
On the regulatory side, Prof. Oyedotun suggested measures to incentivize banks.
“Incentive-based policies, such as differentiated capital requirements or targeted lending quotas for SMEs, may encourage banks to channel more funds into the real sector,” he said.
He warned that without such measures, recapitalization may have limited impact on financial inclusion.
“Without such complementary measures, the risk remains that recapitalization will strengthen banks without significantly deepening financial inclusion.
“Recapitalization is a necessary but not sufficient condition for addressing Nigeria’s credit constraints.
“It strengthens the supply side of finance, but demand-side challenges such as informality, weak documentation, and structural inefficiencies must also be addressed,” Oyedotun said.