The Central Bank of Nigeria (CBN) has issued a fresh directive instructing banks operating under regulatory forbearance to immediately suspend dividend payments, defer bonuses to executives, and halt new investments in foreign subsidiaries or offshore ventures.
The apex bank said the decision is part of broader efforts to reinforce capital buffers, improve the resilience of bank balance sheets, and ensure prudent capital retention across the financial system.
According to the CBN, the new restriction applies specifically to banks currently enjoying regulatory forbearance due to breaches in their credit exposures and Single Obligor Limits—indicators of potential financial stress. The regulator clarified that these suspensions will remain in place until such banks fully exit the forbearance regime and the central bank independently verifies that their capital adequacy and provisioning levels meet prevailing regulatory standards.
In a statement issued with the directive, the CBN said, “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. This supervisory measure is intended to ensure that internal resources are retained to meet existing and future obligations and to support the orderly restoration of sound prudential positions.”
The move is seen as a clear signal that the CBN is shifting from its previous relief-based approach to one of fiscal discipline and regulatory tightening. This comes at a time when Nigeria’s banking sector is entering a crucial phase of recapitalization, with new capital thresholds set to be implemented in stages until 2026. Under the new recapitalization mandate announced by the CBN last year, commercial banks will be required to significantly increase their capital base—some by up to 500 percent—raising pressure on institutions to retain earnings and limit speculative investments.
Analysts believe the CBN’s action is a response to mounting macroeconomic risks, including volatility in Nigeria’s foreign exchange market, high inflation, and growing exposure of banks to risky sectors such as oil and gas. The regulator appears to be taking preemptive steps to prevent systemic vulnerabilities from escalating as monetary conditions tighten and market uncertainties grow.
This is not the first time the central bank has moved to restrict how banks manage profits and risk exposure. In April 2022, the CBN extended interest rate forbearance on restructured loans to ease post-pandemic pressures on borrowers. While the measure provided temporary relief, it also left banks exposed to heightened credit risks without recognizing losses on time. Then in September 2023, the CBN issued a circular barring banks from using gains from FX revaluation for dividends or capital expenditures, ordering such profits to be warehoused in a “Special Regulatory Reserve.”
The CBN followed up in March 2024 by reinforcing that FX gains were volatile and temporary in nature and should not be relied on for capital decisions. It warned banks against using such gains to fund dividend payments or executive bonuses and directed lenders to retain the proceeds to fortify their capital positions as Nigeria transitioned to a unified exchange rate regime under the Tinubu administration.
This latest directive now goes further by not only limiting how profits are deployed but also regulating who receives them and where they can be invested. It reflects a deeper concern by the CBN that, unless properly managed, the sector’s earnings could be siphoned away from productive use at a time when Nigeria’s broader financial stability agenda depends on a strong and well-capitalized banking system.
The central bank’s tone is crystal: banks benefitting from forbearance must now prove that they are financially sound before returning to business as usual. This means that until then, dividend distribution, executive compensation, and foreign expansion plans will have to wait.
