Nigeria's Financial Sector Strengthens as Reserves Hit $48.5 Billion, Banks Report Growth
Nigeria's foreign exchange reserves reached $48.5 billion, the highest level since 2013, while Sterling HoldCo completed its oversubscribed public offer and FMBN posted a 68.4% year-on-year surplus increase, signaling robust recovery across the financial sector.
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Nigeria's financial sector demonstrated significant momentum in early 2026, with the Central Bank of Nigeria's foreign exchange reserves climbing to $48.5 billion—the highest level recorded since mid-May 2013—while major banking institutions reported strong performance metrics that underscore expanding confidence in the country's economic trajectory.
The reserve accumulation represents a sustained rebuilding of Nigeria's external buffers, according to data tracked by Nairametrics. The $48.5 billion figure marks a substantial recovery from previous lows and provides the Central Bank of Nigeria with enhanced capacity to defend the naira, service external debt obligations, and maintain import cover. The reserve position has strengthened despite global commodity price volatility and elevated dollar demand pressures that characterized much of 2025.
Banking Sector Expansion Gains Traction
Sterling Financial Holdings Company Plc commenced the allotment process for its public offer after recording 109.79% subscription, according to The Nation Newspaper. The oversubscription signals robust investor appetite for Nigerian banking sector equity despite macroeconomic headwinds. Sterling HoldCo floated the offer in 2025 as part of its capital-raising strategy, and the successful completion positions the financial holding company to expand its balance sheet and lending capacity in line with Central Bank of Nigeria recapitalization requirements.
The banking sector's regulatory framework has undergone significant revision, with the CBN implementing stricter capital adequacy ratios for commercial banks. Sterling HoldCo's successful capital raise demonstrates that Nigerian financial institutions can access domestic capital markets to meet these enhanced thresholds, reducing reliance on foreign currency-denominated funding sources.
Mortgage Banking Performance Signals Housing Finance Revival
The Federal Mortgage Bank of Nigeria reported a net operating surplus of ₦19.5 billion for the 2025 financial year, representing year-on-year growth exceeding 68.4%, according to Peoples Gazette Nigeria. The state-owned mortgage lender has set a ₦750 billion recapitalization target aimed at expanding housing finance availability across Nigeria's underserved residential property market.
FMBN's surplus growth reflects improved loan portfolio performance and operational efficiency gains at the institution, which serves as the primary vehicle for government-backed mortgage lending. The planned ₦750 billion recapitalization would substantially increase FMBN's lending capacity at a time when Nigeria faces an estimated 28 million housing unit deficit, according to industry estimates. The recapitalization initiative aligns with federal government priorities to expand affordable housing access and stimulate construction sector activity.
Reserve Accumulation Drivers and Sustainability
Nigeria's foreign exchange reserve buildup stems from multiple factors, including improved crude oil production levels, enhanced remittance inflows through formal channels, and CBN foreign exchange management reforms implemented throughout 2025. The apex bank's shift toward a more transparent foreign exchange allocation mechanism has reduced arbitrage opportunities and improved dollar supply to the official market.
Crude oil production has stabilized above 1.5 million barrels per day in recent months, providing enhanced dollar inflows to the federation account. Additionally, the CBN's initiatives to channel diaspora remittances through formal banking channels have boosted documented foreign currency receipts. The reserve position provides a critical cushion as Nigeria continues negotiations with international creditors and works to attract foreign portfolio investment to domestic debt markets.
Financial Sector Outlook
The convergence of strengthening reserves, successful bank capital raises, and improved performance at specialized financial institutions suggests Nigeria's financial sector is entering a growth phase after years of adjustment. However, sustainability depends on maintaining crude production levels, controlling inflation—which reached double digits in 2025—and implementing structural reforms to diversify foreign exchange earnings beyond oil exports.
The banking sector faces continued pressure to meet CBN recapitalization deadlines while managing asset quality in an environment of elevated interest rates and currency volatility. FMBN's recapitalization plan will require National Assembly approval and federal budget allocation, introducing execution risk. Nevertheless, the sector's current trajectory indicates enhanced resilience compared to the challenging conditions that prevailed during 2023-2024, when reserves fell below $35 billion and multiple banks struggled with capital adequacy.
Analysts will monitor whether the reserve accumulation trend continues through the first half of 2026, particularly as global oil demand patterns shift and the Federal Reserve's monetary policy stance influences dollar liquidity conditions. For Nigerian banks, the focus remains on completing capital raises, expanding lending to productive sectors, and navigating the CBN's ongoing regulatory evolution.