Nigeria's Afribank has called off deal talks with Vine Capital over doubts the private equity firm has the ability to raise the necessary funds to recapitalize the rescued lender, banking sources said on Tuesday.

Afribank signed memorandum of understanding with private equity firm Vine Capital in May to begin acquisition negotiations and exchange information before proceeding to having a take-over agreement in place.

"The technical competence of the equity firm and their ability to run a bank is in doubt," a banking source with direct knowledge of the deal told Reuters, adding that the bank will require at least $160 million to recapitalize.

Banking sources said the reserved bidder, Fidelity Bank may be asked to step in.

Nigerian newspaper Business Day reported that the central bank had cancelled Vine Capital's acquisition of Afribank, one of the nine lenders rescued in 2009, to protect financial system stability.

The central bank has given rescued lenders until September to find new investors or accept funds from state-owned asset management company AMCON, effectively nationalization or liquidation.