CBN Directive: Major Nigerian Banks Face Dividend Suspension Until 2028, Says Renaissance Capital.
A new report by Renaissance Capital (Rencap), a leading investment bank focused on emerging markets, has revealed that several of Nigeria’s top banks, including Access Holdings, First Bank Holdings (FirstHoldco), Zenith Bank, United Bank for Africa (UBA), First City Monument Bank (FCMB), and Fidelity Bank, may be barred from paying dividends until 2028 due to a recent Central Bank of Nigeria (CBN) directive. The policy, aimed at strengthening the financial resilience of banks under regulatory forbearance, has sparked significant concern among investors and market analysts.
On 13 June 2025, the CBN issued a circular directing banks benefiting from regulatory forbearance—particularly those with concessions on credit exposures and breaches of Single Obligor Limits (SOL)—to suspend dividend payments, defer executive bonuses, and halt new investments in foreign subsidiaries or offshore ventures. Signed by Olubukola Akinwunmi, Director of Banking Supervision, the directive is part of a broader strategy to bolster capital buffers and ensure prudent capital retention amid ongoing macroeconomic challenges and sector-wide recapitalisation efforts. The restrictions will remain in place until the affected banks fully exit forbearance and demonstrate compliance with capital adequacy and provisioning standards through independent verification.
Rencap’s report, titled Nigerian Banks: Cash is King, estimates significant forbearance exposures for the affected banks: $304 million for Access Holdings, $887 million for FirstHoldco, $1.6 billion for Zenith Bank, $282 million for UBA, $134 million for FCMB, and $296 million for Fidelity Bank. The report suggests that Access, FirstHoldco, and Zenith Bank are particularly vulnerable due to their high forbearance exposures, estimated at 4%, 14%, and 23% of their gross loan books, respectively. These exposures, often tied to loans in the oil, gas, and power sectors, could lead to breaches of SOL thresholds, further complicating their financial positions.
“We anticipate that the banking arms of AccessCorp, FirstHoldco, and Zenith Bank will not resume dividend payments before 2028,” Rencap noted, adding that any dividends from these groups are likely to come from non-banking subsidiaries, which contribute minimally to overall income. In contrast, Guaranty Trust Holding Company (GTCO) stands out, having fully exited forbearance and adequately provisioned for its exposures, making it likely to continue paying dividends. UBA, with a more manageable forbearance exposure of 6% of its gross loan book, is expected to resume dividends by 2026 at the latest.
The CBN’s move has triggered a wave of panic-driven sell-offs in banking stocks, with the Nigerian Exchange (NGX) Banking Index dropping by 3.98% on 16 June, wiping billions off market capitalisation. The Association of Securities Dealing Houses of Nigeria (ASHON) expressed concern over the directive’s timing, given banks’ ongoing efforts to meet new capital thresholds by March 2026. “The indefinite suspension may erode investor confidence in the banking sector, potentially triggering a sell-off of bank shares,” said ASHON Chairman Sam Onukwue.
Financial experts have offered mixed reactions. Adetilewa Adebajo of CFG Advisory described the policy as a “positive step” to ensure banks use fresh capital to clean up non-performing loans (NPLs) and strengthen balance sheets. However, others, including analysts at Emerging & Frontier Capital (EFC), criticised the CBN’s lack of transparency regarding which banks are under forbearance, arguing that the blanket ruling risks penalising institutions indiscriminately. “The CBN could have communicated its concerns directly to the affected institutions,” EFC noted, highlighting the potential for market distortion.
The directive follows previous CBN measures to curb risk-taking, including a 2023 ban on using foreign exchange revaluation gains for dividends and a 2022 extension of interest rate forbearance on loans. With Nigeria’s banking sector grappling with foreign exchange volatility, inflation, and exposure to high-risk sectors, the CBN’s push for discipline aims to safeguard long-term stability. However, the suspension has raised fears of prolonged uncertainty, with Rencap projecting that affected banks will prioritise provisioning for forbearance loans and recapitalisation over shareholder payouts.
As banks navigate these regulatory headwinds, investors are bracing for potential volatility in the stock market. While some view the sell-off as a buying opportunity for fundamentally strong banks like GTCO, others remain cautious, awaiting clarity on the CBN’s timeline for lifting restrictions. The coming months will be critical as Nigeria’s banking sector balances regulatory compliance with investor expectations.
