Following the Central Bank of Nigeria (CBN) directive suspending dividend payments, bonus disbursements, and offshore investments for banks under regulatory forbearance, the Nigerian Exchange (NGX) Banking index yesterday declined by 3.98 per cent.
This is as investor sentiment weakened amid concerns over earnings retention and capital constraints within the banking sector.
While the benchmark index shed 0.15 per cent to close at 115,258.77 points. In the same vein, the market capitalisation also lost N108 billion to close at N72.68 trillion.The CBN, through a circular issued on June 13, 2025, has directed banks to temporarily suspend the payment of dividends to shareholders, defer the payment of bonuses to directors and senior management staff, and refrain from making investments in foreign subsidiaries or embarking on new offshore ventures.
These actions are part of a regulatory review aimed at strengthening the banking sector’s capital position and provisioning adequacy.In a report by Stanbic IBTC said, “banks with high FCY loans, elevated Stage II loans, and significant exposure to oil & gas or power sectors are most at risk.
However, a strong NPL coverage ratio (despite recording low NPL ratio) could mitigate concerns by showing sufficient provisioning.“
Additionally, the ongoing capital raise exercise among Nigerian banks could serve as a buffer, strengthening shareholders’ funds and indirectly improving SOL compliance. Thus, we think First Holdco, FCMB Group, Fidelity Bank and United Bank for Africa (UBA) are the most vulnerable. Expect to see some selling reaction in the banks on the back of circular in the coming trading session, this will give opportunity for long term holders to buy at lower levels most especially in our preferred names, Guaranty Trust Holding Company (GTCO) and Zenith Bank Emerging & Frontier Capital (EFC) noted that “while we have welcomed the CBN’s return to a orthodox monetary policy, we think that it needs to clarify what it wants.
Does it want the banks to raise the capital or not? The first attempted sabotage of their capital raisings was the windfall tax and now they are at it again with this letter.
How will the tier II banks raise capital when they cannot return capital to shareholders?
”The vice president Highcap Securities Limited, David Adnori stated that this developments in the banking sector negatively affected the market performance for yesterday trading, causing a slight decline of about 0.15 per cent.However, he noted that the banking sector managed to recover some ground and lessen the drop in their stock prices. He explained that “new information has come to light regarding a temporary easing of rules, known as forbearance, which the Central Bank of Nigeria (CBN) imposed. This was put in place to help banks manage their non-performing loans; loans that borrowers have not been repaying. The CBN is now ending this forbearance to encourage banks to proactively manage and comply with financial guidelines.”
Adnori pointed out that while some loans were struggling, many have started to perform better recently. He also mentioned that “the banks had exposure to loans in foreign currencies, which made their financial situations riskier. Nonetheless, the banks have been able to meet their debt obligations, and there is no indication of any defaults on their part. This suggests that their stability is not currently at serious risk.”
Adnori also expressed optimism that the banks will regain trust from investors and recover lost value over time.He highlighted that “the market is now looking forward to hearing directly from the banks, as they need to communicate effectively with the public to alleviate any concerns and clarify their situation.”
