The Central Bank of Nigeria (CBN) has announced a temporary removal of caps on the recognition of Additional Tier-1 (AT1) capital in banks’ Capital Adequacy Ratio (CAR), effective from June 30, 2025, to March 31, 2026. This policy shift aims to reinforce capital buffers in Nigeria’s banking sector and support financial institutions as they transition from the regulatory forbearance regime introduced during the COVID-19 crisis. The directive was issued via a circular signed by Olubukola A. Akinwunmi, Director of Banking Supervision.
The CBN clarified that this relaxation is not a replacement for the broader recapitalisation programme detailed in a March 2024 circular. Instead, the temporary measure is intended to provide banks with breathing room to strengthen their capital positions while ensuring the overall financial system remains stable. The goal is to maintain resilience and absorb any residual economic shocks during the final phase of post-pandemic recovery.
Alongside this relaxation, the CBN has placed strict limitations on banks benefitting from these concessions. These include a suspension of dividend payments, bonuses to directors and senior executives, and investments in foreign subsidiaries, as outlined in a separate June 2025 circular. These restrictions will persist until capital and provisioning metrics return to regulatory benchmarks, reinforcing the bank’s intent to maintain financial discipline.
To ensure transparency and accountability, banks are now mandated to submit quarterly disclosures beginning June 30, 2025. These must detail provisioning levels, CAR computations (with and without the relief), reclassified credit facilities, and full documentation on AT1 instruments. The disclosures aim to enhance supervisory oversight and ensure that all financial institutions align with the broader goals of the transition framework.
In addition, banks are required to submit a Capital Restoration Plan at the end of each quarter, detailing their strategies to restore full compliance with prudential standards. These plans will be scrutinized by the CBN and will serve as reference points for ongoing regulatory engagement. The CBN emphasized that the measures are part of a holistic strategy to stabilize Nigeria’s financial system, enhance transparency, and ensure adherence to international best practices.
Source: Business day