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Banks (Finance)

Nigeria's Top Banks Face Regulatory Pressure, Dividend Payments on Hold Until 2028

Strategic Insights

— 2 min read

The Central Bank of Nigeria's directive to top banks has led to a multi-year dividend drought for some of the country's largest lenders. Access Holdings Plc, Zenith Bank Plc, and First Bank Holdings may suspend dividend payments until 2028 as they confront regulatory pressure to rebuild capital buffers to fully provide for legacy forbearance exposures. The directive, released June 13, instructs banks to pause dividends, defer executive bonuses, and halt offshore expansion until they've adequately provisioned for forbearance loans and resolved breaches of single obligor limits.

Key Takeaways:

  • Access Holdings Plc, Zenith Bank Plc, and First Bank Holdings may suspend dividend payments until 2028, following the Central Bank of Nigeria's directive to rebuild capital buffers.
  • The directive aims to ensure banks fully provide for legacy forbearance exposures, with six lenders holding a combined forbearance exposure of $3.5 billion.
  • Zenith Bank is the most exposed, with $1.6 billion in forbearance exposure, followed by ACCESSCORP with $304 million and FIRSTHOLDCO with $296 million.
  • GTCO fully provisioned its exposures and is expected to maintain uninterrupted dividend payments, supported by positive cash profits of N1.2 trillion in FY24.
  • UBA is also expected to resume payouts by 2026, given its manageable exposure and steady liquidity.
  • The dividend suspension comes amid additional strain from the CBN's move to raise the Cash Reserve Ratio (CRR) to 50 percent, which Renaissance estimates cost the banking sector N840 billion in income last year alone.
  • Analysts warn that the capital build-up may not translate into real credit growth, given the stringent CRR regime.
  • A CRR reduction would enhance banking sector liquidity, reduce reliance on commercial paper issuance, and improve overall financial system efficiency.

Statistics:

  • Six lenders hold a combined forbearance exposure of $3.5 billion, with Zenith Bank being the most exposed at $1.6 billion.
  • The CBN's directive aims to ensure banks rebuild capital buffers to fully provide for legacy forbearance exposures.
  • The dividend suspension may affect Access Holdings Plc, Zenith Bank Plc, and First Bank Holdings, with the possibility of no resumption until 2028.
  • GTCO fully provisioned its exposures and posted a positive cash profit of N1.2 trillion in FY24.
  • The CBN's move to raise the CRR to 50 percent cost the banking sector N840 billion in income last year alone.

Sources:

  • "Directive by Central Bank of Nigeria" (June 13)
  • Renaissance Capital report (June 16)
  • "Nigeria's Top Banks Face Regulatory Pressure, Dividend Payments on Hold Until 2028" (Renaissance Capital)

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