Three Bank Mergers Expected Ahead of Recapitalisation Deadline, Report Says

Three bank mergers are expected early this year as financial institutions race to meet the Central Bank of Nigeria’s revised minimum capital requirements ahead of the 31 March 2026 recapitalisation deadline.

This outlook was presented by rating firm DataPro in its 2026 Banking Sector Prospects in Nigeria, which also outlined key risks facing the industry.

By the end of 2025, most tier-1 banks had already met the new capital threshold, with several others announcing compliance at the start of the new year. This has intensified regulatory and market pressure on smaller lenders to strengthen their balance sheets.

Providing insight into the sector’s 2026 outlook, DataPro’s Enterprise Risk Management analyst, Idris Shittu, noted that while major banks are largely compliant, tier-2 institutions face mounting pressure. He explained that three major mergers are likely by early 2026 as banks scramble to meet the recapitalisation deadline.

According to him, the regulatory push has triggered heightened merger and acquisition activity, but it also introduces significant risks. These include post-merger integration challenges such as aligning IT systems, blending organisational cultures, and managing the transfer of non-performing loans—issues that could strain newly merged entities, particularly smaller banks. He added that the tight deadline has prompted intense internal strategy sessions focused on deal execution and risk management.

Shittu further stated that the banking sector will confront three major threats in the new year, requiring increased agility and operational resilience. These include tighter regulation, with a high Cash Reserve Ratio continuing to constrain liquidity; capital pressure from recapitalisation-driven consolidation, which raises execution and integration risks; and rapid technological disruption from fintech innovation, pushing traditional banks to accelerate digital transformation to remain competitive.

He projected that banks would continue to prioritise fee-based income over conventional lending due to the 45 per cent Cash Reserve Ratio for commercial banks, which effectively locks up nearly half of deposit funds and limits liquidity.

On fintech competition, Shittu observed that technology is reshaping Nigeria’s banking landscape, with players such as Moniepoint and Opay rapidly gaining market share, particularly among SMEs and retail customers. In response, he said 2026 could mark a shift as banks evolve beyond traditional services into lifestyle-focused “super-apps.”

These platforms aim to integrate services such as travel bookings, food delivery, and other everyday needs into banking applications to boost customer engagement and retention. However, he warned that legacy systems and slow IT procurement processes could hinder traditional banks, potentially accelerating the migration of younger customers to more agile fintech platforms. To stay competitive, banks may pursue fintech acquisitions or create independent digital subsidiaries capable of operating with greater speed and flexibility.

Looking ahead, Shittu forecast a reduction in the number of banks by the end of 2026 as consolidation deepens. While this could produce a stronger and more resilient banking system capable of supporting larger transactions and Nigeria’s long-term economic ambitions, he cautioned that integration risks remain substantial.

Drawing lessons from previous consolidation efforts, particularly in 2005, he highlighted the dangers of IT failures and cultural conflicts, especially when conservative tier-1 banks merge with more aggressive tier-2 institutions. Such combinations, he said, could result in decision-making bottlenecks and operational disruptions.

He stressed that successful consolidation will depend on thorough due diligence, careful assessment of asset quality and cultural compatibility, and robust post-merger integration planning.

Meanwhile, professional services firm PwC expressed a more optimistic view of the sector, identifying finance as a key driver of economic growth in 2026 in its Nigeria Economic Outlook – January 2026.

PwC noted that regulatory initiatives such as recapitalisation requirements and evolving fintech frameworks are attracting institutional interest. It added that secondary listings by major banks on international exchanges reflect growing cross-border investor confidence.

The firm projected that strong demand for innovative financial products, credit expansion, and improved risk management—alongside expected capital market growth to N262tn, driven by potential listings from Dangote Refinery and NNPC—would enhance liquidity and sustain investor interest across banking, fintech, and insurance.

On technology, PwC observed that banks and fintechs accelerated the adoption of artificial intelligence and blockchain in 2025 to personalise services, automate risk management, and strengthen fraud detection. Major lenders deployed AI-powered chatbots and analytics to improve efficiency, while the insurance sector embraced insurtech through collaboration between regulators and fintech firms.

PwC expects this momentum to continue in 2026, supported by strong investment inflows, a growing pool of tech talent, and expanding embedded finance solutions.