The Central Bank of Nigeria (CBN) has issued a significant directive suspending dividend payments to shareholders, bonuses to directors and senior management, and new investments in foreign subsidiaries or offshore ventures for banks currently under regulatory forbearance. This move, announced in a circular dated June 13, 2025, aims to strengthen capital buffers, enhance balance sheet resilience, and promote prudent internal capital retention within the Nigerian banking sector during this transitional period
What is Regulatory Forbearance?
Regulatory forbearance is a temporary relief mechanism allowing banks to postpone or reduce certain regulatory requirements, such as credit exposure limits and provisioning, to ease financial strain. The banks under this regime are being closely monitored by the CBN as they navigate macroeconomic shocks and sector restructuring.
Key Details of the CBN Directive:
Suspension of all dividend payments to shareholders.
Deferral of bonuses to directors and senior management.
Prohibition of new investments in foreign subsidiaries or offshore ventures.
These restrictions will remain until the banks fully exit the forbearance regime and their capital adequacy and provisioning levels are independently verified to meet prevailing regulatory standards.
Rationale Behind the Suspension:
The CBN’s directive is part of a broader strategy to ensure banks retain internal resources to meet existing and future obligations, supporting the orderly restoration of sound prudential positions. It signals a shift from regulatory relief to discipline, emphasizing capital preservation amid challenges like foreign exchange volatility, inflation, and exposure to risky sectors. The move also aligns with ongoing efforts to recapitalize the banking sector, with new capital thresholds being phased in up to 2026.
Market and Industry Reactions:
Reactions to the directive have been mixed. Some analysts view it as a timely measure to accelerate the cleanup of non-performing loans (NPLs) and restore long-term investor confidence through stronger governance and transparency. Others warn it could pressure bank stock prices due to uncertainty and disrupt dividend declarations, especially for banks that typically pay dividends in June. The suspension of foreign investments is seen as less immediate but still impactful over time.
A CBN insider noted the directive was deliberately timed to give banks a clear signal that the forbearance regime will end by June 30, 2025, with consequences for non-compliance, while minimizing disruption to ongoing capital raising efforts.
Background Context:
This directive follows previous CBN interventions aimed at stabilizing the banking sector, including extending interest rate forbearance on loans during the COVID-19 pandemic, and prohibiting the use of foreign exchange revaluation gains for dividends or capital expenditures to boost capital reserves.
In summary, the CBN’s suspension of dividends, bonuses, and foreign investments for banks under regulatory forbearance is a strategic move to reinforce financial stability, ensure compliance with capital standards, and restore confidence in Nigeria’s banking system during a critical phase of sector reform.
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