Thirty-three financial institutions have increased in size and stability.

The Central Bank of Nigeria's recent recapitalisation effort, which resulted in 33 deposit money banks raising a substantial N44.65 trillion, marks a significant milestone that underscores the importance of robust banks in driving economic growth.

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This development reaffirms the critical role that strong banks play in supporting a thriving economy, particularly as Nigeria navigates an increasingly complex global financial landscape that necessitates regular capital base upgrades.

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Historically, Nigeria's banking sector has benefited from periodic capital strengthening, with the 2004 consolidation exercise led by former CBN Governor, Professor Chukwuma Soludo, transforming a fragmented system into a more resilient one.

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Today's recapitalisation builds on this legacy, ensuring that banks remain adequately capitalised to absorb shocks, manage risks, and finance growth, thereby maintaining the trust and confidence of depositors and investors alike.

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The logic behind regular recapitalisation is straightforward: banking is a confidence business that relies on the trust of depositors and investors, which is reinforced by robust capital adequacy ratios that keep pace with evolving economic realities.

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Following the latest recapitalisation exercise, the top five most capitalised banks are Access Holdings Plc, Zenith Bank Plc, First Bank of Nigeria Holdings Plc, United Bank for Africa Plc, and Guaranty Trust Holding Company Plc, which have strengthened their capital positions to underwrite large transactions and support national development.

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Routine recapitalisation delivers several long-term benefits, including enhanced financial system stability, expanded lending capacity, and improved attractiveness to foreign investors who prioritise well-capitalised and well-regulated financial systems.

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Stronger banks are essential for funding large-scale, long-tenor projects that Nigeria needs, such as power generation and transportation networks, as they are better equipped to take on such risks without jeopardising their balance sheets.

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Moreover, a competitiveness angle comes into play as African economies integrate under the African Continental Free Trade Area, AfCFTA, where Nigerian banks must compete with peers from South Africa, Egypt, and beyond, with capital strength being a decisive factor in this competition.

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However, recapitalisation must be accompanied by stronger corporate governance, improved risk management, and vigilant regulatory oversight, as capital alone cannot compensate for poor lending decisions, weak internal controls, and inadequate customer relationships.

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Routine recapitalisation is not just a regulatory exercise, but an economic imperative that enables a well-capitalised banking sector to intermediate savings, allocate capital efficiently, and support sustainable growth.

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For Nigeria, a strong and resilient economy is inextricably linked to strong banks, which in turn require strong and regularly renewed capital foundations, making the CBN's efforts a crucial step in the right direction.

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Kudos to CBN Governor, Yemi Cardoso, and his team for their efforts in leading this recapitalisation exercise, which will have a lasting impact on Nigeria's economic development.