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Banks (Finance)

Nigerian Banks Face Financial Resilience Test Amid Stringent Regulations

Strategic Insights

— 2 min read

Nigerian banks, such as FirstHoldco, Zenith Bank, UBA, FCMB, and Access Bank, are struggling to maintain financial resilience amidst the Central Bank of Nigeria's (CBN) new directives aiming to strengthen banks' capital buffers and curb regulatory forbearance abuses. A report by Renaissance Capital, titled 'Nigerian Banks: Cash is King,' revealed that FirstHoldco has significant forbearance exposure of 14 per cent, estimated at $887 million. The CBN's measures, including a temporary suspension of dividend payments and deferral of management bonuses, are designed to ensure full provisioning for high-risk exposures and improve cash-based profitability metrics.

Key Takeaways:

  • FirstHoldco's forbearance exposure is estimated at $887 million, representing 14 per cent of its gross loan book.
  • The CBN's new directives aim to strengthen banks' financial resilience and curb regulatory forbearance abuses, with a temporary suspension of dividend payments and deferral of management bonuses.
  • The banking index, NGX Banking Index, dropped by 4 per cent to 1,169.74 basis points amidst investors' reaction to CBN's fresh policy on dividend and bonuses pay-outs.
  • Banks under Rencap's coverage, such as FirstBank and Access, have significant forbearance exposures of 23 per cent and 14 per cent, respectively, of their gross loan books.
  • Rencap estimates that regulatory forbearance exposures at $304 million, $887 million, $134 million, $296 million, $282 million, and $1.6 billion for Access, FirstHoldco, FCMB, Fidelity Bank, UBA, and Zenith Bank respectively.
  • The report also highlights that cash profits provide a more reliable basis for forecasting dividends than accounting profits, with significant growth in accounting profits without a corresponding increase in cash profits impeding banks' ability to meet day-to-day working capital needs and reward shareholders adequately.
  • The stock prices of Access Holdings, FCMB Group, Zenith Bank Plc, First Holdco Plc, UBA, Fidelity Bank, and others plummeted due to investors' reaction to the CBN's policy.

Statistics:

  • NGX Banking Index dropped by 4 per cent to 1,169.74 basis points.
  • FirstHoldco's forbearance exposure estimated at $887 million, representing 14 per cent of its gross loan book.
  • The CBN's measures aim to strengthen banks' financial resilience and curb regulatory forbearance abuses.
  • Regulatory forbearance exposures at $304 million, $887 million, $134 million, $296 million, $282 million, and $1.6 billion for Access, FirstHoldco, FCMB, Fidelity Bank, UBA, and Zenith Bank respectively.
  • Banks under Rencap's coverage have significant forbearance exposures of 23 per cent, 14 per cent, 4 per cent, 10 per cent, 8 per cent, and 0 per cent for FirstBank, Access, Zenith Bank, FCMB, Fidelity Bank, and GTCO respectively.

Sources:

  • Renaissance Capital, 'Nigerian Banks: Cash is King,' June 2025
  • THISDAY, 'CBN's Fresh Policy on Dividend and Bonus Payments Sends Stock Market into a Tumble,' June 2025
  • Highcap Securities Limited, interview with Vice President, Mr. David Adnori
  • InvestData Consulting Limited, Chief Research Officer, Mr. Omordion Ambrose
  • CBN, circular dated June 13, 2025

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