CBN clamps down on banks under regulatory forbearance

The Central Bank of Nigeria (CBN) has issued a directive instructing banks operating under regulatory forbearance to suspend dividend payments, defer bonuses for executives, and halt investments in foreign subsidiaries or offshore ventures.

The suspension will remain until the CBN is able to independently verify the capital adequacy of the banks, according to a statement by the apex bank released Friday, June 13.

“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 statement signed by Olubukola Akinwunmi, director of banking supervision, read.

The move is part of a broader strategy to reinforce capital buffers, improve balance sheet resilience, and ensure prudent capital retention within the banking sector.

The CBN’s directive is particularly significant given the Nigerian banking sector’s ongoing recapitalisation push, with new capital thresholds set to be implemented in phases up to 2026.

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Series of increasingly tight controls

This is not the first time the CBN has taken steps to rein in excessive risk-taking and capital mismanagement by banks. In April 2022, the CBN extended interest rate forbearance on loans by an additional year, while in September 2023, it prohibited banks from using gains from FX revaluation for dividends or other capital expenditures.

The latest directive expands these restrictions, limiting not just how profits are used, but also who can receive them and where they can be invested.

Implications for the Banking Sector
The CBN’s move is likely to have significant implications for the banking sector, particularly in light of FX volatility, inflation, and exposure to risky sectors. As the regulator continues to tighten controls, banks will need to prioritize capital preservation and prudent risk management to ensure their long-term sustainability.

The International Monetary Fund (IMF) had in an Article IV report last year urged the CBN to unwind the regulatory forbearance granted to Deposit Money Banks during the COVID-19 pandemic.

Hope Moses-Ashike

Hope Moses-Ashike is an Associate Editor, Banking and Finance, with more than a decade of experience reporting on Nigeria’s financial system and broader economy. She closely tracks market movements, monetary policy decisions, company disclosures, regulatory actions, economic indicators, and global developments, and interprets what they mean for businesses, investors, policymakers, and households. Her reporting helps readers understand complex issues such as inflation trends, foreign exchange market dynamics, interest rate decisions, bank performance, and investment risks. She also covers major international events and periodically travels to Washington, D.C., to report on the World Bank/IMF Spring and Annual Meetings. Her dedication to financial journalism has earned her multiple recognitions and invitations to high-level professional development programmes. She is an alumna of the International Visitors Leadership Programme (IVLP) in the United States and holds an Advanced Financial Journalism Certificate from the Press Association Training in London, UK. Her other notable achievements include completing the Lagos Business School CMC Programme, the Bloomberg Media Africa Initiative Programme, and a Master Class in Journalism at Rhodes University in South Africa.