In a bid to fortify the Nigerian banking sector and ensure credible recapitalisation, the Central Bank of Nigeria (CBN) has imposed a temporary freeze on dividend payments, bonuses, and offshore investments by banks operating under regulatory forbearance. The decision, which has sparked wide discourse in financial circles, has received commendations from economic experts who describe it as a necessary step toward stabilising Nigeria’s financial ecosystem.
In a circular issued and signed by Olubukola Akinwunmi, Director of Banking Supervision at the apex bank, the CBN directed affected banks to halt dividend distributions, defer executive bonuses, and suspend investments in foreign subsidiaries or offshore ventures. The regulator said the decision is part of an effort to strengthen capital buffers and promote prudent internal capital retention during Nigeria’s ongoing banking recapitalisation drive.
“This temporary suspension is until such a time as the regulatory forbearance is fully exited and the banks’ capital adequacy and provisioning levels are independently verified to be fully compliant with prevailing standards,” the circular stated.
The CBN noted that it had reviewed the capital positions and credit risk exposures of banks operating under forbearance and found the need for immediate measures to ensure sound financial practices.
Reacting to the directive, Tunde Amolegbe, Managing Director of Arthur Steven Asset Management and former President of the Chartered Institute of Stockbrokers, described the decision as a calculated effort to prevent financial engineering in the sector.
“Some banks rely on regulatory forbearance to make profit and declare dividends without having a healthy capital base. This round-tripping of profits does not equate to genuine capital injection,” he explained. “If the current pattern continues unchecked, these banks won’t meet the financial muscle needed to drive Nigeria’s aspiration for a $1 trillion economy.”
Amolegbe maintained that shareholders must now inject real capital instead of relying on recycled profits, describing the policy as temporary but crucial.
Similarly, Ayokunle Olubunmi, Head of Financial Institutions Ratings at Agusto & Co., acknowledged the short-term impact on banks’ ability to pay interim dividends but noted that the move was anticipated. “This measure was expected, as the CBN had earlier hinted that the regulatory forbearance would expire in June 2025. Affected banks must now resolve non-performing loans and comply with the capital requirements.”
He added that while there may be some initial disruptions, most affected institutions would resolve outstanding exposures before the end of 2025.
Also weighing in, Adetilewa Adebajo, Chief Executive Officer of CFG Advisory, said the directive is ultimately designed to bolster investor confidence in the banking system.
“The bottom line is that any bank that wants to pay dividends must first fully provision for its bad loans. This will impact profitability in the short term but is beneficial for long-term health,” he said.
He added that deferring bonuses and restricting offshore investment would not only retain capital within the country but also improve share value and attract genuine foreign investments.
The policy also aligns with the CBN’s broader recapitalisation roadmap announced earlier in the year, which mandates Deposit Money Banks to increase their capital bases to better support Nigeria’s economic growth targets.
Industry insiders say the CBN’s decision signals its intention to ensure recapitalisation efforts lead to tangible growth in the sector and not just paper profits. By enforcing prudent capital management practices, the apex bank aims to increase the sector’s resilience to shocks and stimulate long-term investments.
“The regulator is essentially closing loopholes and ensuring transparency. Banks must now operate on a sounder financial foundation, which is vital for maintaining monetary stability and safeguarding depositors’ funds,” one bank executive told The PUNCH under anonymity.
The move comes amid increasing scrutiny of banks’ balance sheets, as the CBN continues to enforce tighter regulatory compliance following its recent banking reforms under the leadership of Governor Olayemi Cardoso.
While the directive may temporarily affect shareholder returns, experts believe it will create a more transparent, robust, and investor-friendly banking sector in the medium to long term.