Nigeria’s tier-2 banks are under mounting pressure to scale up operations or risk being swallowed in a wave of mergers as the Central Bank of Nigeria (CBN) drives its 2026 recapitalisation programme, a new report by SB Morgen (SBM) Intelligence has warned.
In its latest report, ‘Capital, Competition, and Consolidation: How Nigeria’s Tier-2 banks are responding to the CBN’s 2026 recapitalisation order,’ SBM focuses on Nigeria’s leading tier-2 banks, including First City Monument Bank (FCMB), Fidelity Bank, Stanbic IBTC Bank, Sterling Bank, and Wema Bank.
The report states that the new minimum capital requirements will reshape the country’s banking landscape.
In March 2024, the CBN directed international banks to raise their capital base to N500 billion, national banks to N200 billion, and regional banks to N50 billion before March 2026.
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The regulator said the policy would strengthen financial stability and prepare lenders to support the government’s ambition of building a $1 trillion economy.
“Over the past five years, the share price trajectories of Nigeria’s leading Tier-2 banks—FCMB, Fidelity Bank, Stanbic IBTC, Sterling Bank, and Wema Bank—have reflected both the opportunities and challenges within the country’s evolving financial landscape,” the report said.
“The period was marked by significant regulatory interventions, macroeconomic volatility, and a renewed push for recapitalisation, all of which shaped investor sentiment and trading activity on the Nigerian Exchange (NGX).
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“While Tier-1 banks often dominated headlines with record profits and market leadership, Tier-2 banks demonstrated remarkable resilience and, in several cases, outperformed broader market expectations.”
SBM said tier-2 banks have shown resilience in the equities market despite the imbalance between the two tiers.
“Fidelity Bank emerged as a standout performer, with its share price surging from N1.65 in 2020 to over N21.20 by mid-2025,” the report added.
“This extraordinary growth—over 1,100% in five years—was underpinned by robust earnings, aggressive digital expansion, and successful capital raising efforts.
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“Wema Bank followed a similar trajectory, climbing from N1.50 in 2020 to nearly N15.00 in 2025.
“FCMB and Sterling Bank, while not matching the meteoric rises of Fidelity and Wema, nonetheless posted steady and credible gains.
“FCMB’s share price grew from around N3.33 at the end of 2020 to approximately N9.25 at the end of HY 2025, Sterling Bank’s share price more than tripled over the period, rising from N1.70 to N6.16, buoyed by its focus on retail and SME banking and a disciplined approach to asset quality.”
HOW TIER-2 BANKS ARE RESPONDING TO RECAPITALISATION
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SBM highlighted how the banks are responding differently to the CBN recapitalisation directive.
According to the report, FCMB Group seeks to raise N400 billion in phases, including a N144.6 billion public offer oversubscribed by 33 percent, divestments in subsidiaries, and offshore placements.
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“The plan is structured in three phases: a first phase completed in early 2025 that involved a public offer, which raised N144.6 billion and was oversubscribed by 33%,” SBM said.
“The group also initiated a convertible note issuance, expected to bring in an additional N20–N40 billion by Q3 2025. A second phase will see a divestment of minority stakes (25–30%) in two subsidiaries—Credit Direct Limited and FCMB Pensions Limited—through an Initial Public Offering (IPO) and private placements, targeting proceeds of about N80–N90 billion.
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“A final phase will involve private placements with offshore development finance institutions, likely in the form of preference shares or another public offer, aiming to raise the remaining N170 billion.”
For Fidelity Bank, SBM said the bank has already raised over N270 billion from an oversubscribed public offer and rights issue and is positioning to meet the N500 billion benchmark ahead of schedule.
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“With shareholder approval, Fidelity is set to increase its issued share capital from N26.7 billion to N36.7 billion, creating an additional 20 billion ordinary shares,” the research firm said.
“The bank is now preparing for the final phase of its capital-raising program, intending to meet or exceed the N500 billion minimum capital requirement for international banks.”
Also, Sterling Financial Holdings is pursuing a multi-stage plan of private placements, rights issues, and a forthcoming $400 million public offering.
The report added that Wema Bank is combining a N150 billion rights issue with a N50 billion private placement after completing a N40 billion issue in 2023.
SBM expects consolidation to accelerate as 2026 approaches, with mergers and alliances likely among tier-2 lenders.
“The financial performance of these mid-tier banks in 2025 underscores their capacity to compete and thrive, even as Tier-1 institutions consolidate their dominance,” the report said.
“FCMB’s robust earnings growth, Fidelity’s exceptional capital market performance, and Wema’s digital-led transformation are emblematic of a sector that is both dynamic and responsive to market realities.
“While challenges persist—ranging from rising funding costs to the need for greater non-interest income—these banks have largely maintained asset quality, operational efficiency, and profitability in a demanding macroeconomic environment.”
SBM also said tier-2 banks are at a critical juncture, and their ability to navigate regulatory headwinds, leverage technology, and execute bold capital strategies will determine their place in the next chapter of the country’s financial evolution.
