Nigeria’s Banks Better Shielded From Global Shocks After Recapitalisation – IMF

The International Monetary Fund (IMF) has commended Nigeria’s recently concluded bank recapitalisation exercise, saying the stronger capital buffers are already helping to shield the financial system from mounting global shocks.

Speaking at the presentation of the Global Financial Stability Report during the ongoing IMF/World Bank Spring Meetings in Washington DC, the Fund’s Financial Counsellor and Director of the Monetary and Capital Markets Department, Tobias Adrian, said the benefits of bank recapitalisation become most evident in periods of economic stress.

“Concerning bank recapitalisations, it is in times of stress where the value of bank capital really comes to the fore. So, what we are aiming at for global financial stability is a bank sector that is capitalised against adverse shocks,” he said.

Adrian noted that recapitalisation efforts are not only welcome but are already yielding results, particularly as economies grapple with tightening financial conditions and rising debt vulnerabilities.

“So yes, bank recapitalisations are very welcome and are paying off, particularly under times of stress,” he added, stressing that a resilient banking sector remains central to sustaining financial stability globally.

The IMF further underscored the importance of sound fiscal positions, warning that countries with weak fiscal buffers remain exposed to sudden shifts in global capital flows. According to Adrian, debt sustainability and fiscal discipline are “foundational” to the Fund’s engagement with countries across Sub-Saharan Africa, including Nigeria.

On capital flows, the IMF noted a marked shift in investor behaviour since the outbreak of the Middle East conflict, with emerging markets experiencing stronger-than-usual outflows compared to previous crises.

Adrian explained that capital flow reactions have been “roughly twice as large” as those recorded during the early phase of the Ukraine war, although price movements in financial markets have remained relatively stable.

“There is a large reaction on quantities of capital flows, but the price reaction to date is fairly contained, and that really reflects a broader healthy risk appetite in global markets,” he said.

Also speaking, Assistant Director in the IMF’s Monetary and Capital Markets Department, Jason Wu, pointed out that capital inflows to emerging markets are increasingly skewed towards debt instruments rather than foreign direct investment and equity.

He warned that such a trend could heighten vulnerabilities, particularly for countries with weaker fiscal positions.

“Those emerging markets with better fiscal positions generally have more access to international markets and lower debt spreads. So this counsels us to continue to make improvement on that front in order to guard against sudden capital outflows,” Wu stated.

The IMF’s remarks come as Nigeria intensifies efforts to strengthen its banking sector through recapitalisation, a move widely seen as critical to enhancing the resilience of lenders, supporting credit growth, and positioning the economy to better absorb external shocks.