*Some analysts see move as timely move to fast-track NPLs clean-up

*Others say action may lead to pressure on bank stocks due to uncertainty 

Ndubuisi Francis in Abuja and Nume Ekeghe in Lagos

Mixed Reactions have trailed last weekend’s directive by the Central Bank of Nigeria (CBN) to banks under regulatory forbearance to temporarily suspend dividends, bonuses and new investments in foreign subsidiaries.

In a circular dated June 13, 2025, and signed by the Director of Banking Supervision, Dr. Olubukola Akinwunmi, the CBN instructed all banks currently under regulatory forbearance to suspend the payment of dividends to shareholders, bonuses to directors and senior executives, and investments in offshore subsidiaries or new foreign ventures.

The move, according to the apex bank, is part of a broader strategy to ensure that banks operating under forbearance supervision strengthen their financial resilience and fully comply with capital adequacy and loan provisioning standards.

The CBN emphasised that the restrictions are temporary and will be lifted once key conditions are met, a full exit from regulatory forbearance, and independent verification of capital and provisioning levels as being within acceptable regulatory thresholds.

While some analysts see the CBN’s intervention as timely and strategic in accelerating the resolution of non-performing loans (NPLs) and improving capital buffers, others expressed apprehension that the action might trigger some kind of pressure on banks stocks due to uncertainty.

Some analysts who hold the view that the new directive could lead to pressure on banks stocks at the initial stage, argue that this would be due to the failure on the part of the apex bank to list or identify the banks involved in the forbearance.

While initial reactions from some stakeholders included concerns about investor impact and even share price decline, financial analysts argue that the directive is designed to encourage swift corrective action from the banks ensuring that bad loans are fully provided for, and that future dividend payments are backed by genuinely sound balance sheets.

Chief Executive Officer of CFG Advisory, Adetilewa Adebajo, described the CBN’s decision as a positive step that will ultimately benefit shareholders and the banking system:

“This move, from all accounts and the explanation in the circular, is around capital positions and provisioning adequacy to address the issues around the loan portfolio of banks once and for all. 

“The bottomline is that all banks that want to continue paying dividends must make full provisions for their Non-Performing Loans (NPL), which will invariably impact their profitability. As banks are recapitalizing, it is important that the fresh capital is used to clean up and improve the quality of their risk asset portfolio. 

“Non-payment of dividends, bonuses and offshore investments obviously improves capital retention and should boost stock values,” he said.

Adetilewa added that the policy sends a strong signal of regulatory intent to restore long-term investor confidence through stronger governance and transparency, even if it comes with short-term trade-offs.

On his part, the Head of Financial Institutions Ratings at Agusto & Co., Ayokunle Olubunmi, noted that CBN had already hinted that forbearance would be called off by the end of the first half of the year, however the timely does indicate the seriousness of CBN’s intent.

He said: “Many banks didn’t expect the CBN to take this particular approach. I think they assumed the CBN would simply ask them to make provisions on those loans or classify them. In fact, many of the affected banks had already started working on those facilities even before now.

“But with this move by the CBN, those efforts may be disrupted. For banks that typically pay dividends in June, this might affect them, because they may not be able to resolve those loan issues before the end of the month. That’s why their dividend declarations may be impacted.

On the suspension of investments in foreign subsidiaries of the affected banks, he stated, “Yes, that too will be affected to some extent. But you see, investments in subsidiaries aren’t immediate as they take time. 

“You can delay those for a year or two if needed. Unlike dividends or bonuses, which have more immediate impact, subsidiary investments can wait.

“That said, many international banks except maybe Access Bank were planning to expand internationally using proceeds from their recent capital raises. So yes, it could affect those plans. 

“But from what I know, most of the significant investments weren’t planned for this year anyway. Many of them were looking at 2026, so I don’t think the impact will be major in the short term. But again, I believe many of the unresolved facilities will be cleared before the end of the year.”

Also, Analysts at Proshare noted that the impact on share prices woud be dampend as investors may sell if they are unable to get dividend payouts.

They stated: “The trouble here is that if everyone goes on a selling binge, the banks’ share prices will tank regardless of their strong underlying corporate performances. 

“This would mean that CBN’s Money Market policy choices would affect the Securities and Exchange Commission (SEC)-supervised Capital Market outcomes.”

The Central Bank’s intentions, they added,  are obviously noble, stressing that the natural intentions may be a return to prudent banking practices where the build-up of NPLs is moderated, and capital is available to fund commerce.

“The learning opportunity is primarily about mitigating the economic and financial pain and uncertainty that agents would otherwise experience in the market.”

 However,  a CBN source said, “It was actually a deliberate plan regarding timing and manner of communication

 “There’s a June 30 deadline for all forbearances to roll off and bank have know for about a year or so. This was basically letting them know that there’s no going back and there will be consequences for non-compliance. Also lets the corporate clients involved know that CBN is serious about it. Timing was done to have minimal impact on the capital raise.”

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