CBN: Bank Capital Must Match Stronger Risk Management

The Central Bank of Nigeria (CBN) has warned banks that stronger capital buffers must be matched by tighter risk management, sound corporate governance and cybersecurity as financial institutions face rising geopolitical, technological and climate-related risks.

Deputy Governor, Corporate Services at the CBN, Dr Muhammad Sani Abdullahi, gave the warning in his keynote address at the 38th Seminar for Finance Correspondents and Business Editors.

With the recapitalization process now over, Abdullahi said capital was only the starting point for building a resilient banking system, stressing that banks must strengthen controls, identify risks early and lend based on viable projects.

“Capital, however, is a starting point. Boards and management must maintain sound controls, recognise risks early and lend on the strength of viable projects,” he said.

He said geopolitical uncertainty, climate-related risks, cyber threats and rapid technological change could transmit shocks across borders through financial, trade and technology channels, affecting capital flows, exchange rates and external buffers. “Resilience therefore requires institutions to anticipate emerging risks, absorb shocks, adapt and recover,” he said.

The deputy governor said corporate governance must underpin the banking sector’s resilience, with boards and management expected to demonstrate integrity, accountability and transparency, strengthen internal controls and guard against excessive risk-taking.

“Their decisions must protect the interests of depositors, investors and other stakeholders,” he said, adding that banks’ risk management must extend beyond credit risk to market, liquidity and operational risks, as well as cybersecurity, third-party dependencies and climate-related financial risks.

Abdullahi said the CBN would continue to focus on governance, asset quality, liquidity and large exposures, while expecting banks to protect customer data, maintain reliable payment services and recover quickly from disruptions. “A stronger balance sheet must be matched by stronger management of risk,” he said.

On digital banking, Abdullahi said banks must continuously invest in cybersecurity, data protection, disaster recovery and business continuity. “Innovation brings opportunities, but public trust depends on customers being able to transact securely and access their funds reliably, including when systems come under pressure,” he said.

He furthered that the CBN’s supervisory approach would continue to emphasise risk-based supervision, macroprudential surveillance and enhanced stress testing, alongside financial sector coordination, consumer protection, fintech regulation and responsible innovation.

Abdullahi also said the impact of stronger bank balance sheets should be reflected in productive lending and improved financial services across the economy. “We should assess recapitalisation by the quality of banking services and productive lending it supports, as well as by the amount of capital raised,” he said.

He stressed the need for the benefits to extend to rural communities, women and young entrepreneurs, adding that consumer protection and financial inclusion were integral to financial resilience. “Strong­er bank balance sheets should translate into wider access and better service,” Abdullahi said.

He also urged businesses to improve corporate transparency, governance and sustainability, noting that these increasingly inform credit assessment, while greater financing capacity could support investment in technology, energy, transportation, power, agriculture and manufacturing.