The Nigerian banking sector faced a significant downturn following the Central Bank of Nigeria’s (CBN) recent directive halting dividend and bonus payments, as well as offshore investments for banks under regulatory forbearance. The Nigerian Exchange (NGX) Banking Index dropped by 3.98%, reflecting investor unease about the new policy. The broader market was also affected, with the benchmark index falling 0.15% and the market capitalization shedding N108 billion to close at N72.68 trillion.
The CBN issued a circular on June 13, 2025, instructing banks to suspend shareholder dividends, defer management bonuses, and avoid new offshore ventures. This move is intended to strengthen the capital position of banks and ensure adequate provisioning. Analysts from Stanbic IBTC warned that banks with high foreign currency (FCY) loans, significant Stage II loan volumes, and exposure to oil and gas or power sectors are particularly vulnerable. However, strong non-performing loan (NPL) coverage could offer some reassurance to investors.
Analysts also pointed out that the current capital-raising efforts across the banking sector could provide a buffer against the directive’s financial impact. According to Emerging & Frontier Capital (EFC), preferred banks like GTCO and Zenith may present buying opportunities at lower prices. Still, EFC criticized the CBN for mixed signals, questioning how banks can raise capital if they are restricted from returning capital to shareholders through dividends.
David Adnori, vice president of Highcap Securities, emphasized that the CBN’s policy shift ended a temporary forbearance measure originally designed to help banks manage non-performing loans. While this caused an initial dip in market performance, Adnori noted that many banks are beginning to show improved loan performance and have continued meeting their debt obligations, suggesting that the sector’s overall stability remains intact.
Despite the turbulence, there is cautious optimism that the banking sector will bounce back. Adnori stressed the importance of banks maintaining transparent communication with investors to rebuild confidence. As stakeholders await further clarity from both regulators and financial institutions, market watchers believe long-term investors may find opportunities amid the current volatility.
Source: Leadership