When the Structural Adjustment Programme was launched on 27 July 1986, the CBN held forty bank licences. By December 1992 it had issued one hundred and twenty. The deregulation of bank-licensing rules — minimum paid-up capital lowered in real terms, the requirement of feasibility studies relaxed, the moratorium on new licences lifted — was the single most consequential SAP-era policy for the financial sector, and it produced exactly the credit explosion (and credit catastrophe) the IMF had promised.
The new entrants came in three waves. Wave one (1986–1990) was the merchant-bank boom: ICON Limited, NAL Merchant, IMB International, FSB International, Continental Merchant, Indo-Nigerian Merchant. Wave two (1990–1992) was the universal-bank rush: Diamond Bank (1991), Zenith International Bank (1990), Guaranty Trust Bank (1990), Ecobank Nigeria (1989) — the institutions that would dominate post-2005 banking. Wave three (1992–1994) was the bottom of the barrel: forty-eight banks of which roughly half were registered as fronts for political money or as deposit-gathering Ponzi schemes wearing the title 'bank'.
It did not hold. Between 1994 and 1998 the system suffered its first full-blown distress crisis. Alpha Merchant Bank (closed 21 December 1994); Financial Merchant Bank (1994); Republic Bank (1994); Kapital Merchant Bank (1995); United Commercial Bank (1995); Commerce Bank (1996); Pan African Bank (1998). In total thirty-six banks were closed by the CBN/NDIC between January 1994 and December 1998 — at the time, the largest banking failure in African history. NDIC's depositor-protection regime (created by Decree No. 22 of 1988 with maximum coverage of ₦50,000 per depositor) was the only thing that prevented a generalised run; even so, an estimated ₦69 billion of household deposits was permanently lost. The Failed Banks (Recovery of Debts) and Financial Malpractices Decree No. 18 of 1994 set up the Failed Banks Tribunal under Justice Yaya Jinadu, which tried 217 bankers and recovered roughly ₦4.7 billion before being wound up in 1999.
By 2003 the survivors numbered eighty-nine, but the system was hollow. The average Nigerian bank had paid-up capital of about ₦1.4 billion (≈ US$10 million at the time), no bank ranked among Africa's top 25 by tier-1 capital, single-borrower limits were routinely breached, foreign-correspondent lines had dried up after the failures of the 1990s, and the largest ten banks accounted for over half of all deposits. The stage was set for the most violent restructuring in African banking history — Soludo's ₦25 billion.
Figure 1
Licensed Nigerian banks, 1894–2024
Every regulatory cycle since 1952 has compressed the field. The 2005 Soludo consolidation cut ninety banks to twenty-five in eighteen months.
Figure 2
Minimum paid-up capital required to operate a bank, 1952–2024 (₦ million, log scale)
The regulatory bar has risen by seven orders of magnitude. Each step up has reset who is allowed to call themselves a Nigerian bank.