A step to fortify Nigeria’s banking system and promote financial stability, the Central Bank of Nigeria (CBN) has issued a directive halting dividend payments, director bonuses, and new offshore investments by banks under regulatory forbearance. The move, which primarily affects lenders such as First Bank, is part of broader efforts to rebuild capital buffers in the aftermath of economic shocks that have rattled the sector over the past two years.
The directive was contained in a circular released over the weekend by Olubukola Akinwunmi, Director of Banking Supervision at the CBN. It marks a continuation of the apex bank’s tightening grip on financial oversight as Nigeria navigates persistent inflation, exchange rate volatility, and weakened investor confidence.
Banks currently benefiting from regulatory forbearance—a temporary relaxation of prudential guidelines on credit exposures and single obligor limits—are the primary targets of this new rule. These forbearance measures were originally introduced to support lenders grappling with balance sheet stress due to adverse macroeconomic conditions, including the depreciation of the naira and rising non-performing loans.
Under the new policy, these institutions must prioritize internal capital conservation and cease expansionary ventures abroad. The CBN made it clear that these restrictions would remain in place until the affected banks’ capital adequacy and provisioning levels are independently verified to be fully compliant with regulatory standards.
“This suspension will remain until such a time as the regulatory forbearance is fully exited and the banks’ capital adequacy and provisioning levels are independently verified,” the circular reads.
The directive builds upon earlier CBN measures from 2023 and 2024, when banks were prohibited from using foreign exchange (forex) revaluation gains to fund dividends or capital projects. That policy was designed to prevent the masking of structural weaknesses in bank earnings amid volatile exchange rates.
The apex bank reiterated its commitment to providing transitional support while ensuring full compliance. It emphasized that robust capital buffers are essential for shielding the financial sector from systemic risks and safeguarding depositor funds.
“The CBN will monitor compliance closely and continue to engage with affected institutions to guide them through the transition process,” Akinwunmi noted.
Industry stakeholders have largely welcomed the move as a necessary corrective measure, even though it may temporarily dampen investor enthusiasm and restrict access to returns for shareholders.
Dr. Uche Obi, a financial analyst with Lagos-based Meristem Securities, said, “This is a tough but necessary step. It signals that the CBN is serious about long-term stability, even if it comes at the cost of short-term shareholder expectations.”
The announcement comes at a time when the CBN is also overseeing the recapitalization of Bureau De Change (BDC) operators and driving reforms aimed at boosting transparency and governance in the financial sector.
Meanwhile, shareholders in affected banks may need to brace for limited earnings distribution in the current fiscal cycle, as the banks focus on restructuring their balance sheets.
With Nigeria’s financial system still absorbing the shockwaves of recent economic turbulence, the Central Bank’s move is a calculated effort to reinforce fiscal discipline and restore confidence in the banking sector. The clampdown on dividends and offshore investments underscores a strategic pivot toward prudence and long-term resilience—an approach that analysts believe could yield stability if consistently enforced.