In a bold move to bolster Nigeria’s financial sector, the Central Bank of Nigeria (CBN) has activated a new phase of regulatory forbearance, mandating that affected banks suspend dividend payments, executive bonuses, and foreign investments until further notice. This intervention targets banks that have exceeded credit exposure limits and Single Obligor Limits (SOL), as the apex bank intensifies efforts to restore capital strength and mitigate systemic risk.
Financial expert Charles Obi-Chukwu, speaking on MoneyLine with Nancy, explained that forbearance is a regulatory relief tool, historically deployed during periods of economic strain to allow banks temporary leniency while stabilizing their balance sheets. “We’ve seen it globally during the 2008 financial crisis, and again in 2020 during the COVID-19 pandemic,” he noted.
Why Now?
Despite Nigeria officially emerging from COVID-era restrictions, lingering aftershocks—including exchange rate volatility, high inflation, and fuel subsidy removal—have left many banks vulnerable. The CBN’s decision to extend forbearance policies through June 2025 reflects concern over the quality of credit portfolios and capital adequacy levels across the sector.
Banks that benefited from regulatory waivers during COVID-19 and its aftermath are now being asked to tighten risk controls. Some had reported strong profits in 2023, yet dividend payouts were capped by the CBN to encourage earnings retention and recapitalization.
Key Policy Impact
• Dividend restrictions protect capital buffers and reduce vulnerability to loan defaults.
• Bonus suspension aligns leadership incentives with long-term stability.
• Ban on foreign investments prioritizes local reinvestment and liquidity conservation.
• Increased capital adequacy: Institutions may be required to exceed the ₦500 billion minimum benchmark, either through rights issues, equity raises, or internal profit reinvestment.
Data Snapshot:
• ₦500 billion: Minimum capital requirement for banks under recapitalization reforms
• CBN’s deadline: June 2025 for full compliance
• 30%+: Estimated loan exposure among Tier-1 banks tied to volatile sectors
• Inflation (April 2025): 33.7%, a key pressure point on asset quality
Obi-Chukwu emphasized that the new directive is a course correction. “We’re returning to how banking should function—focused on risk, capital, and resilience, even if it means short-term discomfort.”
The policy signals a stronger, more disciplined banking environment ahead—one better prepared to support real-sector lending, attract investment, and maintain financial stability through shocks.
As recapitalization advances, Nigeria’s banking sector is poised for a healthier and more sustainable future, built on transparency, risk management, and long-term economic value.
