Nigerian Banks Face Capital Discipline Tests as CBN’s Forbearance Window Ends in 2025
Nigeria’s banking sector is approaching a critical juncture as the Central Bank of Nigeria (CBN) prepares to end its regulatory forbearance program by December 2025. Fitch Ratings has warned that while most banks are expected to comply with prudential requirements, a few institutions may continue under forbearance, but with strict limitations. The move underscores the urgency for lenders to strengthen capital buffers and meet regulatory thresholds.
CBN’s forbearance framework, introduced in June 2025, was designed to give banks temporary relief from prudential credit exposure limits and Single Obligor Limits (SOL). These measures allowed banks extra time to restructure risky loans and improve balance sheets amid economic turbulence. However, with the December deadline approaching, the focus is shifting from leniency to strict enforcement, compelling banks to recognize and provision for non-performing loans promptly.
Several banks have made significant progress. GTCO cleared its regulatory forbearance as of December 2024, while Zenith Bank fully addressed SOL exposures by June 2025. FCMB reduced its exposures from N538.8 billion in September 2024 to N207.6 billion by May 2025 and is on track to exit the program by year-end. Fitch notes that these measures aim to improve balance sheet resilience and reinforce financial institutions’ capital buffers.
The expiration of the forbearance period will trigger the reclassification of some Stage 2 loans as impaired, increasing loan-loss provisions and pressuring capital adequacy ratios. Weaker banks could see reduced profitability and the need for additional capital. Analysts, however, say most lenders are better prepared than in previous years due to loan restructuring, equity injections, and improved net interest margins. The CBN’s recapitalization drive and ongoing mergers have also contributed to a leaner, more resilient banking sector.
Despite economic headwinds such as inflation and high exposure to vulnerable sectors, banks are increasingly positioned to meet both local and external obligations, including $2.2 billion in Eurobonds due by 2026. For Nigeria’s banking industry, the December 2025 deadline is more than regulatory compliance—it is a stress test of resilience and capital discipline. Banks that have strengthened governance, risk management, and capital positions are likely to emerge stronger, while laggards could face operational restrictions, signaling a new era of accountability and transparency in Nigerian banking.
Source:The Sun