CBN Demands Action Plans From Banks To Fix Capital Deficits

The Central Bank of Nigeria (CBN) has issued a directive mandating all banks to submit comprehensive Capital Restoration Plans by Monday, July 14, 2025, marking the end of its COVID-era regulatory forbearance and loan waivers.

In a circular dated June 20, 2025 and signed by its director of Banking Supervision, Dr. Olubukola Akinwunmi, the apex bank gave banks with capital deficits 10 working days, effective from the end of the second quarter, June 30, 2025, to prepare and submit a comprehensive Capital Restoration Plan.

Outlining a series of transitional measures aimed at ensuring a credible and orderly exit from the forbearance regime introduced during the pandemic to cushion the financial system, the CBN said effective June 30, 2025, all waivers on Single Obligor Limits (SOL) and regulatory forbearance extended during the pandemic have been terminated.

Affected banks must fully align all credit exposures with existing Prudential Guidelines and other applicable regulations. To facilitate asset quality clean-up, the CBN said it is temporarily waiving the one-year retention rule on fully provisioned loans related to forbearance, enabling banks to write them off immediately and reduce their non-performing loan (NPL) ratios.

It also temporarily lifted AT1 Capital Recognition Limits, saying “to strengthen capital buffers during this transition period, the current regulatory caps on the recognition of Additional Tier 1 (AT1) capital in the Capital Adequacy Ratio (CAR) computation are temporarily lifted from June 30, 2025, to March 31, 2026.

“This adjustment is intended to enhance banks’ capital buffers without compromising long-term capital planning. The temporary lifting of regulatory caps on AT1 recognition solely supports capital adequacy and is not a substitute for the ongoing recapitalisation programme as stated in our circular dated March 28, 2024.”

Earlier, the apex bank suspended dividend payments, bonuses to directors and senior management, and investments in foreign subsidiaries. The bank said the “restrictions remain in force until capital levels and provisioning are fully restored to regulatory compliance.”

Also, it said that to promote regulatory transparency and support supervisory oversight, all banks must submit quarterly disclosures, effective June 30, 2025. Consequently, banks must submit detailed provisioning status and reconciliation of affected credit exposures, CAR calculations with and without transitional reliefs classification migration data for restructured or impacted loan facilities, and comprehensive disclosure of AT1 instruments, including issuance terms, usage, and related conditions.

The submission is expected to reach the Director of Banking Supervision no later than 10 working days following the end of the quarter, effective from June 30, 2025, which will be Monday, July 14, 2025.

On the capital restoration plan, the CBN directed that the “plan should detail the management’s proposed strategies to restore full regulatory compliance, including (but not limited to) cost optimisation initiatives, risk asset reduction, significant risk transfers, and necessary business model adaptations.

“The plan must cover the entire period until full normalisation of capital and asset quality indicators is achieved. Plans submitted will be subject to regulatory review and approval, forming the basis for continuous supervisory monitoring and engagement throughout the transition.