Nigeria’s Financial Watchdog Cracks Down on Weak Capital Positions
In a decisive regulatory move, the Central Bank of Nigeria (CBN) has suspended the payment of dividends, bonuses, and foreign investments for banks currently operating under its regulatory forbearance regime a supervisory framework designed to cushion struggling banks during economic headwinds.
This new directive affects institutions with elevated credit exposures, Single Obligor Limit (SOL) breaches, or capital provisioning challenges, marking a serious turn in the CBN’s effort to shore up Nigeria’s banking sector.
What the CBN Has Ordered:
According to the June 2025 circular, banks benefiting from credit or SOL forbearance must:
- Suspend dividend payments to shareholders
- Defer bonuses to directors and senior management
- Avoid new investments in foreign subsidiaries or offshore ventures
This freeze remains in place until:
- Regulatory forbearance has been fully exited, and
- Independent assessments confirm the banks’ capital adequacy and provisioning levels are compliant with CBN standards.
The Why Behind the Directive
This is not a punishment, it’s a protective measure.
“The aim is to retain internal capital to meet obligations and restore healthy prudential ratios,” the CBN explained.
By locking capital inside Nigerian banks, the CBN is trying to:
- Strengthen capital buffers
- Reduce risk exposure from overleveraged credit books
- Prevent external capital flight via offshore ventures
Who’s Affected?
Not all banks are impacted only those:
- Currently under regulatory forbearance
- With ongoing solvency or provisioning gaps
- That exceed single borrower exposure thresholds
For these banks, profit distribution and offshore expansion are now off the table until their house is fully in order.
Financial Juggernut’s Take:
This isn’t the first time the CBN has stepped in to moderate capital behaviour.
Earlier this year, we warned that banks were raising capital and paying out dividends simultaneously, a red flag for long-term resilience.
ICYMI: Nigerian Banks Raised ₦1.1 Trillion Yet Paid Over ₦800 Billion in Dividends
Now the CBN has moved from observation to intervention.
“This is a smart, if uncomfortable, call. You can’t build capital resilience by distributing cash while under forbearance.”
What Should Investors Do?
| Action | Why It Matters |
| Expect dividend suspensions | Shareholder income will be hit in affected banks |
| Watch Q3 earnings | Capital buffers and provisions will weigh on profits |
| Look for regulatory exit announcements | These signal which banks have cleaned up their books |
Final Word
The CBN is sending a clear message:
“Stability before payouts.”
Banks must first prove they are strong enough to operate independently before rewarding shareholders or expanding globally.
And that’s not just good supervision it’s sound economic risk management.
