African bank capital ratios remained resilient in 2024 despite pressure from Nigeria's currency reforms and Ghana's debt restructuring

Africa's banking sector ended 2024 with aggregate capital adequacy ratios above regulatory minimums across all four major markets — Nigeria, Ghana, Kenya, and South Africa — a result that belies the scale of the shocks each system absorbed during the year. Nigeria's sector-wide capital adequacy ratio (CAR) closed December 2024 at 15.20%, according to the Central Bank of Nigeria's fourth-quarter economic report, recovering sharply from 12.52% at end-September 2024 and settling just above the 15% threshold required of internationally authorised banks. In Ghana, the banking sector's CAR (including regulatory reliefs) reached 14.0% at year-end, the first annual improvement since the Domestic Debt Exchange Programme (DDEP) was launched in late 2022 and erased nearly six percentage points from the sector's solvency cushion. Kenya's banks remained well capitalised, with the Central Bank of Kenya reporting a total capital-to-risk-weighted-assets ratio of 19.6% for the sector at December 2024 — 510 basis points above the 14.5% regulatory minimum. South Africa's major banks, meanwhile, maintained CET1 ratios in the 12.6%–13.7% range, and on a combined basis their common equity tier 1 ratio edged up to 13.3% in 2024 from 13.2%, according to PwC's Major Banks Analysis.

The Nigerian outcome is particularly notable given the severity of the currency shock that preceded it. When President Bola Tinubu's administration floated the naira on 14 June 2023 — unifying the official and parallel markets in a single move — the currency depreciated by roughly 40% against the US dollar within days, falling from approximately N460 per dollar to N750 before a sustained slide carried it to N1,535 by end-2024. The initial concern was that foreign-currency-denominated risk-weighted assets would inflate faster than banks could absorb the capital hit. In practice, because Nigerian banks generally held net long foreign-currency positions, the devaluation also generated FX revaluation gains that cushioned the expansion in FX-denominated RWA. Fitch Ratings, reviewing the sector in mid-2023, expected widespread declines in banks' capital ratios and placed three banks with thinner buffers on Rating Watch Negative, while noting that net long FX positions could generate revaluation gains. In the fourth quarter of 2024 the sector CAR rose to 15.20% from 12.52%, which the CBN attributed to higher total qualifying capital and lower risk-weighted assets.

At the institutional level, Zenith Bank raised N350 billion through a combined rights issue and public offer launched in August 2024, which was 160% subscribed. Guaranty Trust Holding Company (GTCO) reported a CAR of 39.3% at December 2024, against a regulatory minimum of 15%. The CBN's sector-wide NPL ratio eased to 4.50% at end-2024 from 4.58% at end-September, below the 5% prudential benchmark.

Capital positions across major African banking markets, 2024

Ghana's trajectory demands separate treatment given the structural depth of the DDEP impact. When the government launched its Domestic Debt Exchange Programme in late 2022, banks holding government bonds — the dominant asset class in most Ghanaian bank portfolios — faced net present value losses, and the sector's CAR fell from 19.8% in 2020 to 16.6% by end-2022 and further to 13.9% by end-2023. The Bank of Ghana's response involved a two-pronged regulatory accommodation: reducing the prescribed CAR threshold from 13% to 10%, and permitting DDEP-related losses to be spread equally over four years (effective 2022) for CAR computation. The sector CAR with reliefs edged up to 14.0% at end-2024 from 13.9%, while CAR without reliefs rose to 11.3% from 8.3%, according to the Bank of Ghana — but the marginal nature of the recovery and an NPL ratio that deteriorated to 21.8% in 2024 from 20.6% in 2023 underlines that Ghana's banks remain in a protracted repair phase rather than a full restoration of pre-crisis buffers.

South Africa's four largest commercial banks — Standard Bank, FirstRand, Absa, and Nedbank — maintained CET1 ratios well above minimum regulatory requirements at end-2024. Standard Bank Group ended December 2024 with a CET1 of 13.5%, slightly below the 13.7% recorded at end-2023; its Africa Regions franchise contributed 41% of group headline earnings in 2024. FirstRand Group's CET1 rose to 13.7% from 13.3% a year earlier, according to PwC's analysis. Absa's CET1 of 12.6% at end-2024 sat marginally above its board target range of 11.0%–12.5%, and management expects it to finish 2025 at the top end of that range. Nedbank's CET1 of 13.3% continued to track well above its 11.0%–12.0% board target. On PwC's combined basis for the big four (Absa, FirstRand, Nedbank and Standard Bank), the CET1 ratio edged up to 13.3% in FY2024 from 13.2%.

TGB Analyst Commentary

The aggregate 2024 outcome — sector-wide CARs above regulatory minimums across Nigeria, Ghana, Kenya, and South Africa — came after the naira float and the DDEP haircuts absorbed by Ghana's banks in 2022–23. The mechanistic lesson is straightforward: African banks' balance sheet structures, characterised by long net FX positions in Nigeria and by high-yield government securities in Ghana that ultimately retained some value, provided a degree of natural shock absorption that compensated partially for the absence of the deep capital markets that allow banks in mature economies to shed risk more efficiently. The structural explanation is less comforting: capitalisation above minimum floors does not, by itself, signal lending capacity or asset quality health. Ghana's NPL ratio of 21.8%, Nigeria's residual FX-loan exposure, and the ongoing recapitalisation demands from the CBN's March 2024 programme all suggest the region's banks absorbed these shocks partly by restricting credit extension rather than by absorbing losses through thick capital buffers.

The forward picture is shaped by three forces. The CBN's recapitalisation programme, which runs to a March 2026 deadline, is structurally thickening Nigerian capital bases and should reduce vulnerability to the next currency shock. Ghana's banks face a constrained credit-creation environment until NPL ratios normalise. In South Africa, above-target CET1 positions and improving macroeconomic conditions create room for modest capital deployment into lending and dividends. Kenya's regulatory tightening — requiring minimum core capital to rise tenfold from KES 1 billion to KES 10 billion by 2029 under the Business Laws (Amendment) Act 2024 — will likely prompt a consolidation wave that reshapes the sector before the decade ends. Taken together, African banking capital adequacy in 2024 represents a baseline of resilience rather than a springboard for expansion: the region's banks passed the stress test, but the next phase of growth will require addressing the structural vulnerabilities that the 2022–2024 shock cycle exposed.