The Central Bank of Nigeria has indicated that Nigerian banks may need to raise additional capital depending on the outcome of a new stress testing exercise aimed at evaluating the strength of their credit portfolios against potential economic shocks.

The apex bank disclosed this in a directive instructing all banks to commence the stress test from April 1, 2026.

It added that any lender found to have a capital shortfall after the exercise would be required to raise fresh capital to cover the gap within an 18-month timeframe.

This development comes as banks conclude their ongoing recapitalisation exercise ahead of the March 31 deadline set by the Central Bank of Nigeria.

According to the regulator, the stress testing framework is designed to estimate how adverse economic conditions could affect banks’ Non-Performing Loans, loan loss provisions, and Capital Adequacy Ratio.

The CBN said all lenders are required to submit the results of their board-approved reports on or before the close of business on April 30, 2026.

“Following the conclusion of stress testing, banks are expected to report: Pre-Stress CAR, Post-Stress CAR, and Capital Shortfall (if any).

“It is pertinent capital to note that banks shall be required to raise 100% of their reported stressed capital shortfall or 50 per cent of the shortfall computed from CBN stress analysis of the banks (whichever is higher), within an 18-month period.

“Once communicated, this level of capital shall become the risk-based capital requirement of the bank until the next cycle of stress testing, which would take place 6 months after the end of the capital raise to close the shortfall in stressed CAR,” the CBN said.

The CBN said the exercise will factor in risks such as declining commodity prices, foreign exchange volatility, supply chain disruptions, reduced demand across key sectors, and governance-related concerns.

The regulator explained that the stress test is meant to assess the potential effect of these shocks on banks’ Non-Performing Loans (NPLs), loan loss provisions, and Capital Adequacy Ratio.

Under the framework, banks are required to apply the test to all credit exposures, covering both on-balance sheet and off-balance sheet items, including loans granted to directors and other insiders.