The Association of Securities Dealing Houses of Nigeria (ASHON) has expressed concern over the Central Bank of Nigeria (CBN’s) recent circular indefinitely suspending dividend payments by banks.
Its Chairman, Sam Onukwue, in a statement on yesterday, said the directive, issued on June 13, was said to ensure compliance with regulatory forbearance and Single Obligor Limit (SOL) requirements. According to him, the timing of the directive is inopportune, given the ongoing efforts by banks to meet the increased minimum capital requirement which is regulatory induced.
He said: “The announcement of this price-sensitive information has caused shock and dismay due to its potential impact on shareholders and the stock market.
“The indefinite suspension may erode investor confidence in the banking sector, potentially triggering a sell-off of bank shares on the Nigeria Exchange Limited (NGX), where the sector dominates daily transactions. “The CBN could have managed this situation more discreetly to avoid speculation and market volatility,” adding that unless an alternative solution is found, this directive may hinder banks’ capital-raising efforts, particularly those yet to commence their capital raise before the deadline,” Onukwue said. Confirming Onukwue’s fears, the NGX All-Share Index declined during the intraday trading session as investors exited positions in bank stocks in reaction to the CBN’s decision to end the forbearance regime. Also given the new strict compliance posture of the financial services sector by the central Bank of Nigeria (CBN), Nigerian Deposit Money Banks are likely to face lower profitability, tighter capital buffers and a potential uptick in non-performing loans (NPLs).
This is the fallout of the CBN’s move, conveyed in a circular issued on June 13, foreclosing the regulatory forbearance measures introduced at the height of the COVID-19 crisis.
In the circular, the CBN ordered all banks benefiting from forbearance on credit exposures, or breaches of Single Obligor Limits to suspend dividend payments, defer executive bonuses and halt new investments in foreign subsidiaries, or offshore ventures.
Consequent upon this development, 10 banks, which annual reports are filed with the Nigerian Exchange, recorded a cumulative N3.77 trillion in loan impairment charges between 2023 first quarter and same period of 2025. The figure surged from N1.34 trillion in 2023 to N2.13 trillion in 2024, with an additional N297 billion in provisions recorded in the first quarter of 2025 alone.
Meanwhile, reports from some banks indicated that they have cleared, or are near to clearing their forbearance positions, suggesting this circular may have been targeted at banks that have not, or yet to take actions in this regard. However sources within one of the banks said it cleared their regulatory forbearance as of December 2024. The bank’s Group Chief Executive (name withheld) also stated this in the bank’s earnings call back in April. Also, another source in one of the affected banks gave indication that the balance of their forbearance will be cleared this month.
Regulatory forbearance was introduced in March 2020 as part of the pandemic-era relief measures that allowed Nigerian banks to restructure loans to struggling sectors, such as oil and gas, agriculture and power, without classifying them as impaired.
According to data compiled by Renaissance Capital, the CBN’s forbearance policy kept the sector-wide NPL ratio at a modest 4.3 per cent, below the 5 per cent regulatory threshold, despite severe macroeconomic dislocations.
Estimates by Renaissance Capital showed that seven Tier-1 and mid-tier banks carry a combined $4 billion in restructured, or “forborne” loans, primarily concentrated in the oil and gas sector. These loans are largely classified as Stage 2 under the International Financial Reporting System (IFRS 9), denoting a significant increase in credit risk, but not yet non-performing. The figures for the affected banks ranged from $910 million, $848 million, $771 million, $535 million, $556 million, $332 million and $60 million in that order. The data was gleaned from a Rencap report published in December based on estimates from the bank’s 2024 half-year results.
But with the worst of the pandemic now behind and Nigeria’s foreign exchange and monetary environment shifting, the (CBN) is keen to unwind what it sees as prolonged and distortionary relief. The phased withdrawal of forbearance is expected to exert pressure on banks’ capital positions.
According to the report, under a base case scenario where banks are required to take a 10 per cent provision against forbearance loans through equity, Capital Adequacy Ratios (CAR) could decline significantly. The report posited that the CAR of some of the affected Money Deposit Banks would fall by an estimated 128 basis points; 149bps; while some others would decline by as much as 394bps. The cheering news is that one indigenous oil group that was heavily indebted to one of the affected banks, has resumed interest payments, suggesting an improvement in cash flow, ostensibly from improved spot market oil prices arising from the crisis in the middle east
. In a worst-case scenario, where loans are reclassified as NPLs and banks are required to provision through their profit and loss accounts, NPL ratios could exceed the CBN’s benchmark. Renaissance Capital projected that NPL ratios could rise to 7.2 per cent and 7.1 per cent for some banks, while it could dip to 6.7 per cent and 6.2 per cent respectively for others.
The stock market trading direction appears to have switched to bear mode, with a bucket of sell orders already executed by brokers ahead of the inflation data release. Banks have been posting strong earnings amidst pressure on asset quality, with some of these loans unlikely to bear fruit, but ring-fenced by forbearance granted in the post-COVID-19 era.
Apart from banking names that are bleeding profusely due to profit-taking activities by the sell-side actors, Oando and Dangote Sugar Refinery are running south.
As at yesterday, the NGX All Share Index witnessed a bearish trend, Alpha Morgan Capital Limited told investors in an emailed note, reflecting a loss of -0.13 per cent, Stockbrokers reported that this decline was largely driven by sell-offs in some mid- to high-capitalized stocks. OANDO is on the top loser chart, down by 8.70 per cent during the intraday trading session.
The stock was trailed by negative price movement that has plunged the market value of some conglomerates by as much as 7.80 per cent. Investors are also in a selling mood, as a huge volume of some banks’ shares are offloaded, causing the tier-2 bank’s share price to drop by -7.58 per cent. There is an apparent weak buying sentiment for some financial institutions’ stocks which have lost almost 6.49 per cent of its market value.
The Nation investigation revealed that losses of up to 5.15 per cent, -4.70 per cent, -4.02 per cent -3.29 per cent, -0.72 per cent, -0.70 per cent, and -0.24 per cent, among others, have been recorded.
On 13 June 2025, the CBN issued a circular directing banks currently under regulatory forbearance, particularly with respect to credit exposures and SOL, to immediately suspend dividend payments to shareholders. Banks are also expected to defer bonuses to directors and senior management and halt new offshore investments or expansion into foreign subsidiaries.
The directive, signed by Director of Banking Supervision, Olubukola A. Akinwunmi, aims to reinforce the resilience of Nigeria’s banking sector by improving capital buffers and strengthening balance sheets. These restrictions will remain in place until the affected banks fully exit the forbearance regime and demonstrate compliance with capital adequacy and provisioning standards—validated through independent assessments.
“The suspension of dividends may negatively affect investor sentiment, particularly among dividend-focused shareholders”, CSL Stockbrokers said in a commentary note on Monday. Additionally, banks could face increased provisioning requirements, higher reported NPL ratios—since loans, even when fully provided for, can only be written off after a one-year holding period—and downward pressure on capital adequacy ratios and earnings, analysts explained.
“The ability and timeline for exiting the forbearance regime will largely depend on the size of each bank’s exposure, as well as the strength of their profitability and existing capital buffers,” the firm said.