Abuja, July 11, 2025 — In a strategic move to strengthen the capital base of Nigerian banks and reinforce financial system stability, the Central Bank of Nigeria (CBN) has announced the temporary suspension of the regulatory cap on Additional Tier 1 (AT1) capital, effective immediately until March 2026.
The policy shift, revealed in a circular issued by the apex bank on Wednesday, is aimed at encouraging banks to shore up their capital buffers through the issuance of AT1 instruments, a key component of Basel III-compliant capital structures.
AT1 capital, often raised through perpetual bonds or hybrid instruments, serves as a vital cushion for banks during periods of financial stress. By lifting the cap — previously pegged at a specific ratio of risk-weighted assets — the CBN is providing banks with more flexibility to raise funds and meet higher capital requirements amid ongoing reforms in the financial sector.
Why It Matters to You:
This development comes at a time when Nigerian banks are facing increasing pressure to scale operations, finance infrastructure, and manage rising credit risks. For everyday Nigerians, the move could have the following implications:
- Stronger Banks, Safer Deposits: By increasing their capital strength, banks will be better equipped to withstand shocks, safeguard customer deposits, and support lending activities.
- Improved Access to Credit: A healthier capital position may enable banks to extend more credit to businesses and individuals, boosting economic activity and job creation.
- Increased Investor Confidence: The policy may also attract foreign and local investors interested in Tier 1 instruments, supporting market liquidity and enhancing Nigeria’s financial reputation globally.
- Possible Higher Costs for Banks: While it’s a growth-oriented policy, banks may need to offer attractive yields to investors in these instruments, which could affect operational margins in the short term.
The CBN stressed that the temporary measure will be reviewed by March 2026, with the expectation that banks would have taken full advantage of the window to meet emerging prudential standards in line with global best practices.
This is part of the broader regulatory overhaul under CBN Governor Olayemi Cardoso, who has emphasized transparency, capital adequacy, and a market-driven monetary framework as pillars of his reform agenda.