The Central Bank of Nigeria has instructed all banks to conduct stress tests starting April 1, 2026, and submit results by April 30, 2026. Here’s why this deadline is critical:
1. Transition to risk-based capital requirements
The CBN is shifting from a fixed capital requirement to a risk-sensitive approach. This means banks’ capital needs will now reflect the actual risk in their loan portfolios, rather than a standard benchmark. Missing the deadline could mean banks are operating without updated, regulator-approved capital measures, exposing them to penalties.
2. Ensure financial stability
Stress tests simulate extreme scenarios, like severe recessions or waves of loan defaults. The results tell the CBN whether a bank can absorb shocks without collapsing. Meeting the deadline ensures that:
Banks’ balance sheets are resilient.
New capital raised is adequate and not immediately eroded by bad loans.
3. Regulatory compliance
The CBN has made submission of stress test results mandatory. Banks must provide a Board-approved report by April 30. Non-compliance can lead to:
Regulatory sanctions
Restrictions on business operations
Potential reputational damage
4. Support Nigeria’s Economic Goals
The stress tests are part of a broader plan to strengthen the banking sector to support Nigeria’s $1 trillion economy target by 2030. Banks that fail to comply may limit their ability to finance major infrastructural and developmental projects.
5. Preparation is Key
To meet the April 1 deadline, a member of the firm’s rating team and an Enterprise Risk Management (ERM) expert, Idris Adeleke, issued the advisory on behalf of DataPro at a webinar on the CBN’s stress testing directive.
To comply with the directive, he advised banks to act quickly, saying a detailed portfolio analysis should be done immediately or “when the results or the numbers of March 31 come out”.
“Prioritise data gathering and migration of credit exposures to meet the strict regulatory deadline,” the risk expert said.
“Ensure collaboration across risk, finance, and compliance teams to finalise the stress test results on time.
“The Board-approved stress testing report must be submitted to the Central Bank of Nigeria by April 30, 2026, close of business.”
He said a stress test aims to determine the resilience of the institution by evaluating how a Bank should handle extreme economic conditions, such as a severe recession or market crash.
DataPro said the new CBN mandate introduces severe stress assumptions that will directly impact the Capital Adequacy Ratio (CAR), including a ‘staged migration’, which requires Banks to assume a severe deterioration in asset quality across all credit exposures.
Other assumptions are sectoral sensitivity, which mandates banks to apply an additional 10 percent provisioning floor to deteriorated sectors; and insider credits, which directs Banks to treat all director- and insider-related exposures as fully in default.
Speaking further, Adeleke said the stress test framework aligns “perfectly” with Section 13 and Section 63 of the Banks and Other Financial Institutions Act (BOFIA) 2020.
The expert said that with the policy, the regulator wants to see that Banks have enough capital to handle the kind of risks they are taking.
“A large capital base alone can be fragile if underlying assets are actually deteriorating,” the DataPro official said.
“The CBN goal is to ensure that the new capital you are raising is not swallowed up immediately by existing bad loans.
“There are a lot of brought-in dead loans in the balance sheet because the directive says both on and off-balance sheet should be considered when you are doing your baseline data gathering.”
He said the simulation checks will allow the CBN to see whether the new capital banks can absorb “the wave of defaults in their balance sheets”.
Adeleke emphasised that the apex bank is transitioning from a fixed capital requirement to a risk-based capital requirement.
“So, the stress test result shall become the Bank’s official individual capital requirement until the next supervisory cycle,” the expert said.
While the goal of the recapitalization exercise is for size and solvency, he said the essence of the risk-based capital instruction (stress testing) is for stability and risk sensitivity.
“The outcome of this risk-based capital charge is to determine the buffer and see whether you need additional capital to do your business,” the ERM expert said.
“Another thing we need to consider is that the government of Nigeria, by 2030, is looking at a $1 trillion economy. That’s the ambition.”
He said with such an ambition, Banks operating within a $1 trillion economy should have a “bulletproof balance sheet to take on those infrastructural developments”.
He said DataPro is willing to provide support to Banks and other financial institutions to ease compliance.