The Central Bank of Nigeria (CBN) has warned that the ongoing recapitalisation of the banking sector could heighten concentration risk in Nigeria’s capital market, potentially sidelining non-bank issuers despite the prevailing bullish trend in equities.

The caution was contained in the apex bank’s report titled Macroeconomic Outlook for Nigeria, 2026: Consolidating Macroeconomic Stability Amid Global Uncertainty, which highlighted emerging weaknesses within the country’s financial system.

According to the CBN, while the recapitalisation programme is essential for strengthening banks’ balance sheets and improving resilience, it could result in investor focus being disproportionately tilted towards banking stocks.

“Despite the bullish momentum, the capital market could face higher concentration risk from the banking sector, as the ongoing recapitalisation could trigger investor fatigue and crowd out other issuers,” the CBN said in the report.

The bank explained that the surge in capital-raising activities by deposit money banks could restrict access to funding for non-financial corporates, especially as banks dominate equity issuance during the recapitalisation period.

Although recent gains in capital adequacy and liquidity ratios have provided some buffers for banks, the CBN cautioned that these improvements remain susceptible to negative macroeconomic shocks.

“An increase in credit losses or foreign exchange illiquidity could erode capital reserves, breach prudential thresholds, and strain liquidity coverage,” the apex bank said, adding that such developments could disrupt financial intermediation and undermine market confidence.

The report further identified rising non-performing loans as a medium-to-high risk to the banking system, noting that a deterioration in asset quality could weaken earnings and exacerbate systemic vulnerabilities.

Additionally, the CBN highlighted exchange rate volatility as a significant risk, stating that a sharp depreciation of the naira though deemed unlikely could adversely impact banks’ balance sheets and liquidity positions, while expanding monetary aggregates and intensifying inflationary pressures.

Beyond financial risks, the apex bank expressed concern over growing cybersecurity threats, pointing to the high level of interconnectedness within the financial system.

“The high degree of interconnectedness among financial institutions creates a systemic susceptibility, where cyberattacks on systems could propagate data breaches, compromise confidential information, and erode public confidence in the financial system,” the report stated.

On the fiscal front, the CBN warned that Nigeria’s 2026 budget outlook remains exposed to oil price and production shocks due to the country’s heavy dependence on oil revenue, which is expected to account for more than 57 per cent of total government earnings.

The bank added that although non-oil revenue projections depend on the effective implementation of the Nigeria Tax Act, 2025, challenges such as weak tax compliance, limited public awareness, and shortcomings in tax administration could constrain revenue growth.

The CBN concluded that maintaining macroeconomic stability amid global uncertainty would require coordinated policy measures to manage financial sector risks, improve public finance management, and promote a more balanced development of the capital market beyond the banking industry.

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