DataPro warns risky bank mergers may rise in 2026 as lenders rush to meet recapitalisation rules, raising integration and stability concerns

Financial rating firm DataPro has warned that at least three risky bank mergers are likely to take place in early 2026 as Nigerian lenders scramble to meet the Central Bank of Nigeria’s minimum capital requirement ahead of the 31 March recapitalisation deadline, raising concerns about financial stability and execution risk.

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The forecast was contained in DataPro’s 2026 Banking Sector Prospects in Nigeria, which highlights regulatory pressure, technological disruption and capital strain as key threats to the sector.

DataPro’s Enterprise Risk Management analyst, Idris Shittu, said most Tier-1 banks had already met the new capital threshold by the end of 2025, while smaller institutions remained under intense pressure to comply.

“By the end of 2025, major banks will have successfully met the minimum capital threshold required by the Central Bank of Nigeria,” Shittu said.

“Meanwhile, Tier-2 banks are under increasing pressure to comply, with three significant mergers expected by early 2026 as institutions scramble to meet the 31 March recapitalisation deadline.”

He said the rush to consolidate has created an active mergers and acquisitions environment but warned that post-merger integration could expose banks to serious operational risks.

“IT system harmonisation, cultural alignment and the migration of non-performing loans could strain newly merged entities, especially among smaller banks,” Shittu said, describing ongoing deal negotiations as intense “war room” exercises focused on execution and risk mitigation.

Shittu identified what he called a triple threat confronting banks in 2026: tighter regulation, capital pressure from consolidation and accelerating competition from fintech firms.

He noted that the Central Bank’s 45 per cent cash reserve ratio continues to restrict liquidity, forcing banks to rely more on fee-based income than traditional lending.

“Nearly half of naira deposits are effectively sterilised,” Shittu said, adding that this has limited banks’ ability to expand credit while increasing pressure on profitability.

On technology, Shittu said fintech companies such as Moniepoint and Opay were rapidly gaining market share, particularly among small businesses and younger retail customers.

“In response, 2026 is poised to become the year Nigerian banks evolve beyond traditional banking into lifestyle super-apps,” he said, adding that legacy IT systems and slow procurement processes were putting conventional lenders at a disadvantage.

He warned that failure to adapt could accelerate the migration of customers to more agile digital platforms, making rapid innovation or fintech acquisitions unavoidable.

Shittu also projected that the number of banks operating in Nigeria would decline by the end of 2026 as consolidation intensifies.

“While this promises a more resilient banking system capable of supporting larger transactions, the integration risks are substantial,” he said, citing past consolidation failures marked by system breakdowns and cultural clashes.

He stressed that effective due diligence, asset quality reviews and cultural compatibility would be critical to avoiding instability.

Professional services firm PwC, however, offered a more optimistic outlook, saying regulatory reforms and capital market expansion would sustain growth in the sector.

PwC said anticipated listings by major state-owned and industrial firms could deepen liquidity and attract new investors, while continued adoption of artificial intelligence, blockchain and embedded finance would drive innovation across banking and insurance.

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Despite the growth prospects, analysts agree that the coming consolidation phase will test the resilience, governance and technological readiness of Nigeria’s banking system in what is shaping up to be a decisive year for the sector.