Central Bank of Nigeria Directs Banks to Suspend Dividends, Bonuses, and Foreign Investments Amid Regulatory Forbearance

Strategic Insights -

The Central Bank of Nigeria (CBN) has issued a directive to banks under regulatory forbearance to temporarily suspend dividends, bonuses, and new investments in foreign subsidiaries. The move, part of a broader strategy to ensure banks strengthen their financial resilience and comply with capital adequacy and loan provisioning standards, has sparked mixed reactions from analysts and stakeholders.

While some view the CBN's intervention as timely and strategic, others express concern that it might trigger pressure on banks' stocks due to uncertainty. Financial analysts argue that the directive is designed to encourage swift corrective action from banks, ensuring that bad loans are fully provided for and future dividend payments are backed by sound balance sheets.

According to Chief Executive Officer of CFG Advisory, Adetilewa Adebajo, the CBN's decision is a positive step that will ultimately benefit shareholders and the banking system: "This move, from all accounts and the explanation in the circular, is around capital positions and provisioning adequacy to address the issues around the loan portfolio of banks once and for all."

Key Takeaways:

  • The CBN's directive affects banks under regulatory forbearance, requiring them to suspend dividends to shareholders, bonuses to directors and senior executives, and investments in offshore subsidiaries or new foreign ventures.
  • The restrictions are temporary and will be lifted once key conditions are met, including a full exit from regulatory forbearance and independent verification of capital and provisioning levels within acceptable regulatory thresholds.
  • Analysts argue that the directive is designed to encourage banks to make full provisions for non-performing loans (NPLs) and maintain sound balance sheets to ensure future dividend payments.
  • The suspension of investments in foreign subsidiaries may impact banks' plans for international expansion, but the impact is expected to be minimal in the short term.
  • The directive has sparked concerns among investors due to the uncertainty surrounding dividend payouts and potential pressure on banks' stocks.
  • Analysts at Proshare noted that the impact on share prices will be dampened as investors may sell if they are unable to receive dividend payouts.

Statistics:

  • The directive affects banks currently under regulatory forbearance.
  • The restrictions on dividends, bonuses, and foreign investments are temporary and will be lifted once key conditions are met.
  • The CBN's intention is to ensure that banks strengthen their financial resilience and comply with capital adequacy and loan provisioning standards.
  • Adetilewa Adebajo estimates that all banks that want to continue paying dividends must make full provisions for their NPLs, which will impact their profitability.

Sources:

  • The Central Bank of Nigeria (CBN)
  • Circular dated June 13, 2025, signed by Dr. Olubukola Akinwunmi, Director of Banking Supervision
  • Adetilewa Adebajo, Chief Executive Officer of CFG Advisory
  • Ayokunle Olubunmi, Head of Financial Institutions Ratings at Agusto and Co.
  • Analysts at Proshare