The International Monetary Fund has described Nigeria’s recently concluded bank recapitalisation exercise as a critical buffer against rising global financial risks, noting that stronger capital positions will help the banking system withstand external shocks.
The financial counsellor and director of the Monetary and Capital Markets Department at the IMF, Tobias Adrian, made this assessment while addressing journalists during a press briefing on the Global Financial Stability Report. Other officials present at the briefing included Athanasios Vamvakidis, deputy director of the Monetary and Capital Markets Department; Jason Wu, assistant director in the same department; and Meera Louis, communications officer at the IMF.
Adrian explained that periods of global uncertainty typically expose weaknesses in financial systems, making bank capital a key line of defence. “In times of stress, the value of bank capital really comes to the fore. What we are aiming for in global financial stability is a banking sector that is capitalised against adverse shocks,” he said. He noted that Nigeria’s recapitalisation exercise has come at a crucial time when global markets are facing heightened volatility driven by geopolitical tensions, tighter financial conditions, and shifting investor sentiment. “Yes, bank recapitalisations are very welcome and are paying off, particularly under times of stress,” Adrian added.
The IMF highlighted that although global financial markets have remained relatively orderly despite ongoing conflicts and energy market disruptions, underlying vulnerabilities persist, especially in emerging markets and developing economies. Adrian pointed out that Sub-Saharan Africa has experienced significant swings in capital flows since the onset of recent global shocks, even though asset prices have remained relatively stable. “When we look at capital flows to Sub-Saharan Africa, we see a sizeable reaction in terms of volumes, even larger than what we observed during the early phase of the Ukraine war. However, price movements have remained fairly contained, reflecting still-healthy global risk appetite,” he said. He warned, however, that such conditions could change quickly if global risk sentiment deteriorates, potentially exposing countries with weaker buffers.
On Nigeria specifically, Adrian noted that being an oil-producing economy presents both opportunities and risks in the current environment of elevated energy prices. “Some countries are benefiting from higher oil prices if they are net exporters. But even then, they still face inflationary pressures through higher domestic energy and food costs,” he said. He added that the situation creates a complex policy environment for central banks, which must balance inflation control with growth concerns.
Adrian emphasised that the current inflationary pressures are largely supply-driven, particularly from disruptions in oil production, limiting the effectiveness of traditional monetary policy tools such as interest rate hikes. “The option value of waiting is high in many cases. Central banks need to assess how persistent these shocks are before acting aggressively,” he said.
Beyond Nigeria, the IMF flagged broader risks in emerging markets, including rising public debt, refinancing pressures, and increased reliance on non-bank financial institutions, which could amplify shocks under adverse conditions. He stressed that policymakers must remain vigilant by closely monitoring financial vulnerabilities, strengthening oversight of both banks and non-bank institutions, and maintaining readiness to provide liquidity support where necessary. “The task for policymakers is not to predict shocks, but to ensure that vulnerabilities are understood, contained, and that there is operational readiness to act if instability arises,” Adrian said.
The IMF also underscored the growing importance of cyber resilience and the risks associated with artificial intelligence in financial systems, warning that technological advancements, while beneficial, could introduce new vulnerabilities if not properly managed.
