DataPro, a technology-driven rating agency, has urged Nigerian banks to immediately begin portfolio reviews and intensify data gathering in preparation for the Central Bank of Nigeria’s (CBN) upcoming risk-based capital stress testing directive.
Speaking at a webinar titled “Bank Capital Stress Testing: Getting the CBN Directive Right,” DataPro risk expert Idris Adeleke warned that delays could prove costly as the regulator moves to enforce stricter capital requirements tied to credit risk exposures.
“Begin portfolio analysis now and prioritise data gathering,” Adeleke said, stressing that banks should act immediately or, at the latest, once their March 31 numbers are finalised.
The CBN directive, issued on March 6, mandates banks to test resilience against severe economic shocks. The exercise takes effect from April 1, 2026, following the conclusion of the industry-wide recapitalisation programme. Banks are required to submit Board-approved stress testing reports to the CBN by April 30, 2026.
According to Adeleke, the new framework introduces tough assumptions that could significantly impact Capital Adequacy Ratios (CAR), particularly for banks with weaker asset quality. Key provisions include the “staged migration” rule, a 10% provisioning floor for vulnerable sectors, and full impairment of insider-linked exposures.
“The CBN goal is to ensure that the new capital you are raising is not swallowed up immediately by existing bad loans,” Adeleke said. He emphasised that both on- and off-balance-sheet exposures must be considered to capture the true health of banks’ balance sheets.
The stress tests aim to determine whether fresh capital injections can absorb potential shocks, especially in the event of a surge in loan defaults. Adeleke also highlighted that the results will define each bank’s individual capital requirement until the next supervisory cycle, signalling a shift from capital size to resilience under pressure.
“This directive marks a significant policy shift designed to strengthen financial system stability in line with President Bola Tinubu’s $1 trillion economic target,” he said. “Banks must have bulletproof balance sheets to finance large-scale infrastructure and economic expansion without compromising stability.”
The DataPro webinar provided practical guidance on stress modelling, capital shortfall validation, and standardised reporting templates, helping banks comply with the CBN’s threshold requirements, which range from 50% to 100% under different stress scenarios.
With the April 30 deadline fast approaching, Adeleke’s message to banks is clear: act swiftly, strengthen internal systems, and confront asset quality risks head-on to meet the new regulatory expectations.
