The Central Bank of Nigeria (CBN) has issued a directive requiring commercial banks to submit comprehensive capital restoration plans as part of its strategy to phase out the forbearance regime and strengthen the nation’s banking sector. The announcement, detailed in a circular published on the CBN’s website on July 7, 2025, underscores the regulator’s commitment to fostering financial stability and responsible banking practices.
Details of the Directive
Signed by Olubukola Akinwunmi, the CBN’s Director of Banking Supervision, the circular outlines a series of measures to ensure banks transition smoothly out of forbearance. These include the termination of forbearance exposure and waivers on Single Obligor Limits, as well as a suspension of dividend payments, executive bonuses, and investments in foreign subsidiaries for non-compliant banks.
The cornerstone of the CBN’s strategy is the requirement for affected banks to submit a Capital Restoration Plan by the 10th working day following the end of each quarter, starting from June 30, 2025. The plan must outline management’s strategies to achieve full regulatory compliance, including cost optimization, reduction of risk assets, significant risk transfers, and adjustments to business models. The CBN emphasized that these plans should cover the entire period needed to restore capital adequacy and asset quality to regulatory standards.
Enhanced Transparency and Oversight
To ensure accountability, the CBN has mandated quarterly disclosures starting June 30, 2025, covering critical financial metrics. Banks must provide detailed provisioning statuses, reconciliations of affected credit exposures, Capital Adequacy Ratio (CAR) calculations (with and without transitional reliefs), classification migration data for restructured loans, and comprehensive details on Additional Tier 1 (AT1) instruments, including issuance terms and conditions.
These disclosures will facilitate regulatory oversight and continuous engagement with banks throughout the transition period. The CBN stated that submitted plans will undergo thorough review and approval, forming the basis for ongoing supervisory monitoring.
Context and Implications
The CBN’s directive reflects its broader objective of ensuring macro-financial stability amid Nigeria’s evolving economic landscape, marked by challenges such as inflation and foreign exchange volatility. The forbearance regime, introduced to provide temporary relief to banks facing capital and asset quality pressures, is now being phased out as the CBN pushes for stricter adherence to regulatory standards.
The measures are part of a “firm but supportive framework,” according to the CBN, aimed at fostering sustainable banking practices while safeguarding the financial system. By requiring banks to adopt proactive strategies, such as risk asset reduction and cost optimization, the CBN aims to strengthen the resilience of Nigeria’s banking sector and mitigate systemic risks.
Broader Economic Context
The directive comes at a time when Nigeria’s financial sector is navigating significant economic headwinds, including a public debt surge and inflationary pressures. The CBN’s focus on capital restoration aligns with its efforts to stabilize the banking system, which plays a critical role in supporting economic growth and investor confidence.
Analysts view the CBN’s actions as a necessary step to ensure banks are adequately capitalized to withstand economic uncertainties. “This move signals the CBN’s determination to enforce discipline while providing a clear roadmap for banks to regain compliance,” said a Lagos-based financial analyst.
Next Steps for Banks
Banks are now tasked with developing detailed capital restoration plans to meet the CBN’s stringent requirements. The first submissions are due shortly after June 30, 2025, marking the beginning of a closely monitored transition period. As the CBN intensifies its oversight, the success of these plans will be critical to ensuring the long-term stability of Nigeria’s financial institutions.
The CBN’s directive underscores its proactive approach to addressing vulnerabilities in the banking sector, setting the stage for a more robust and sustainable financial system in Nigeria.
