The Central Bank of Nigeria (CBN) has placed banks still operating under forbearance measures under stringent supervision to strengthen the nation’s banking sector. This follows a June 13 directive mandating these banks to suspend dividend payments, defer executive bonuses, and halt new offshore investments. The CBN’s strategy, detailed in a statement by Acting Director of Corporate Communications Hakama Sidi Ali, aligns with its 2023 bank recapitalization program, aiming to enhance capital buffers and ensure long-term financial stability amid post-COVID economic challenges.
Targeted Measures for Affected Banks
The CBN clarified that only a limited number of banks, those with unresolved forbearance exposures from the COVID-19 era, are subject to these restrictions. Forbearance, introduced in March 2020, allowed banks to restructure loans without classifying them as impaired, maintaining a sector-wide non-performing loan (NPL) ratio of 4.3%. The current measures include temporary curbs on capital distributions to retain internally generated funds and improve capital adequacy, aligning with global regulatory standards like Basel III, though Nigeria’s requirements are stricter.
“All affected banks have been notified and are under close supervisory engagement,” the CBN stated, emphasizing a time-bound transition to full compliance. The approach mirrors post-crisis reforms in major markets like the U.S. and Europe, ensuring a robust financial system. The CBN is also collaborating with the Bankers’ Committee and Body of Bank CEOs to maintain transparency.
Renaissance Capital Highlights Exposure
A recent Renaissance Capital report, “Nigerian Banks, Cash is King,” identified Zenith Bank, FirstBank, and Access Bank as having the highest forbearance exposures, 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 reported exposures of 10% ($296 million) and 8% ($134 million). Conversely, GTCO and Stanbic IBTC have cleared their forbearance loans, with GTCO provisioning fully by December 2024. UBA, with a $282 million exposure, is expected to resume dividends by 2026.
The report notes that forbearance loans are concentrated in the oil and gas sector, raising concerns about potential breaches of the CBN’s Single Obligor Limit (SOL), designed to mitigate credit risk concentration. Zenith, FirstBank, and Fidelity are at risk, while FCMB remains compliant.
Banking Sector Resilience
Despite these challenges, the CBN asserts that Nigeria’s banking sector remains fundamentally strong. The recapitalization program has driven significant capital inflows and balance sheet improvements. The restrictions, described as routine, aim to reinforce resilience amid macroeconomic pressures like naira devaluation and inflation. The CBN’s proactive supervision and stakeholder engagement underscore its commitment to safeguarding financial stability and supporting Nigeria’s economic growth.
Industry Response and Outlook
FCMB recently reassured investors, reporting a reduction in forbearance loans from N538.8 billion in September 2024 to N207.6 billion by May 2025, with plans to sustain dividends through non-banking subsidiaries. GTCO’s proactive write-off of its Aiteo loan, as reported on June 17, 2025, positions it favorably. However, the CBN’s directive may pressure stock prices for banks like Zenith, FirstBank, and Access, with dividend suspensions projected until 2028. Analysts view these measures as critical for long-term stability, though short-term investor sentiment may be tested.
