A new Renaissance Capital (Rencap) report, “Nigerian Banks, Cash is King,” has highlighted the significant forbearance loan exposures of several top Nigerian banks, forecasting dividend suspensions until 2028 for some. The findings follow a Central Bank of Nigeria (CBN) directive on June 13, 2025, ordering banks with unresolved forbearance loans to halt dividends, defer executive bonuses, and pause offshore investments. The measures aim to strengthen capital reserves and ensure compliance with stringent prudential standards, particularly the Single Obligor Limit (SOL).
CBN’s Regulatory Crackdown
The CBN’s directive targets banks still benefiting from forbearance measures, introduced during the COVID-19 pandemic to allow loan restructuring without impairment classification. These measures kept the sector’s non-performing loan (NPL) ratio at 4.3%, below the 5% threshold. As Nigeria’s economy stabilizes, the CBN is phasing out forbearance, requiring full provisioning for affected loans. The restrictions will persist until banks clear their exposures and meet regulatory capital requirements, a process Rencap estimates could extend to 2028 for some.
Banks with High Exposure
Rencap’s analysis ranks Zenith Bank, FirstBank, and Access Bank as the most exposed, with forbearance loans at 23% ($1.6 billion), 14% ($887 million), and 4% ($304 million) of their gross loan books, respectively. Tier-II banks Fidelity Bank and FCMB report exposures of 10% ($296 million) and 8% ($134 million). In contrast, GTCO and Stanbic IBTC have zero exposure, having provisioned fully by December 2024. UBA, with a $282 million exposure, is expected to resume dividends by 2026 due to strong cash profits.
The report flags Zenith, FirstBank, and Fidelity for potential SOL breaches, as their exposures are concentrated in the oil and gas sector, particularly upstream and refinery projects. FCMB remains compliant, with its largest single exposure at $68.1 million, below its $94 million limit.
FCMB and Zenith Respond
FCMB Group Plc issued a statement on June 16, 2025, confirming a reduction in forbearance loans from N538.8 billion in September 2024 to N207.6 billion by May 31, 2025. The bank anticipates a temporary NPL spike to 11.5% as it exits forbearance, but expects a decline below 10% by year-end, supported by loan growth. FCMB plans to pay dividends from non-banking subsidiaries. Zenith Bank sources indicated plans to clear forbearance loans by December 2025, citing sufficient profits to cover exposures.
First HoldCo, FirstBank’s parent, emphasized its strong shareholder support and attractive valuation, noting potential benefits from a possible Cash Reserve Ratio (CRR) review and sustained income growth.
Dividend Outlook
Rencap projects that Access Bank, FirstBank, and Zenith Bank will suspend dividends from their banking arms until 2028, relying on minimal payouts from non-banking subsidiaries. UBA’s outlook is brighter, with dividends likely resuming in 2026. GTCO, having cleared its exposures, faces no restrictions. The report highlights that cash profits, rather than reported earnings, are a better performance indicator due to IFRS rules allowing interest recognition on Stage 2 loans without cash receipts, distorting liquidity assessments.
Broader Implications
The CBN’s directive aligns with Nigeria’s 2023 bank recapitalization program, aiming to enhance financial stability amid macroeconomic challenges like naira devaluation and inflation. While necessary, the dividend suspensions may dampen investor sentiment, particularly for dividend-focused shareholders. The pause on offshore investments could also limit banks’ expansion under the African Continental Free Trade Agreement (AfCFTA).
On June 16, 2025, the Nigerian Exchange (NGX) All-Share Index dipped 0.13%, reflecting sell-offs in banking stocks. Analysts predict short-term pressure on share prices but long-term benefits from stronger balance sheets. The CBN’s rigorous supervision, as reported on June 18, 2025, underscores its commitment to a resilient banking sector, crucial for Nigeria’s economic growth.
