Nigeria’s tier 1 banks are expected to suspend dividend payout over the next three years following the Central Bank of Nigeria (CBN) latest directive for them to rebuild capital buffers and resolve regulatory forbearance exposures.
The directive could see dividend payouts suspension is expected to persist until 2028 for several institutions, dampening investor sentiment and reshaping capital allocation strategies.
This is as the Association of Securities Dealing Houses of Nigeria (ASHON) has said the Central Bank of Nigeria’s (CBN) directive suspending dividend payments by banks under regulatory forbearance may hinder banks’ capital-raising efforts.
This directive, issued on June 13, 2025, aims to ensure compliance with regulatory forbearance and Single Obligor Limit (SOL) requirements.
However, ASHON believed the timing of this directive is inopportune, given the ongoing efforts by banks to meet the increased minimum capital requirement which is regulatory-induced.
The chairman of ASHON, Sam Onukwue, said “the announcement of this price-sensitive information has caused shock and dismay due to its potential impact on shareholders and the stock market.”
He said the indefinite suspension may erode investor confidence in the banking sector, potentially triggering a sell-off of bank shares on the Nigeria Exchange Limited (NGX), where the sector dominates daily transactions.
ASHON suggested that the CBN could have managed this situation more discreetly to avoid speculation and market volatility.
According to Onukwue, unless an alternative solution is found, this directive may hinder banks’ capital-raising efforts, particularly those yet to commence their capital raise before the deadline.
Onukwue reassured investors that the CBN’s directive to temporarily suspend dividend payments by banks should not cause undue panic, saying “our banks have strong fundamentals and potential for growth.
We advise investors to consult certified stockbrokers for informed guidance during this period.”
Meanwhile, bearish sentiment sustained on the Nigerian equities market for the second trading session of the week, yesterday as sell-offs on Transcorp Power Plc and 34 others dragged the market down by N183 billion.
The All Share Index (ASI) declined by 348.61 points, representing a loss of 0.30 per cent to close at 114,910.16 points. Accordingly, market capitalisation lost N183 billion to close at N72.497 trillion.
The downturn was impacted by losses recorded in medium and large capitalised stocks, amongst which are; Transcorp Power, Oando, Custodian Investment, United Bank for Africa (UBA) and First Holdco.
Investor sentiment, as measured by market breadth, closed negative as 29 stocks advanced, while 35 declined.
The total volume traded rose by 9.1 per cent to 787.306 million units, valued at N25.667 billion, and exchanged in 23,170 deals.
On market outlook, analysts at Afrinvest Limited said, “notwithstanding the positive inflation print for May, we expect the market to remain bearish, as sentiment stays weak due to market knee jerk reaction to Central Bank of Nigeria’s circular to Deposit Money Banks (DMBs) and profit-booking in other sectors.”
Meanwhile, According to a June 2025 report by Renaissance Capital Africa, the CBN on June 13 directed all banks to pause dividend payments, defer management bonuses, and halt foreign investments until they fully provision for legacy loan exposures arising from pandemic-era regulatory forbearance.
Renaissance Capital projects that dividend payments from the banking arms of major players such as Access Holdings Plc, First Bank Holdings Plc, and Zenith Bank Plc will remain on hold until 2028, as they work through provisioning shortfalls and potential breaches of the Single Obligor Limit (SOL).
Noting that they expect banking arms of the affected banks to pause dividend payments until they have fully provided for their forbearance exposure and single obligor limit exposures, Renaissance Capital said “we anticipate that the banking arms of ACCESSCORP, FIRSTHOLDCO and ZENITHBANK to potentially resume dividend payments in 2028.
“As such, we expect dividend payments henceforth to come from the non-banking subsidiaries of the above-mentioned Groups. Given that the majority of these Group’s income is primarily from their banking business, we do not see any substantial dividend payments from their non-banking subsidiaries.
Following the expected pause in dividend payments it is expected that this will weigh on bank share prices as investors react negatively to the dividend suspension. Among our coverage, ACCESSCORP and ZENITHBANK have already completed their recapitalization exercises and thus won’t be adversely impacted by this development.
Similarly, GTCO and STANBIC should remain unaffected as we expect both groups to continue their dividend payments uninterrupted. We do not anticipate the dividend pause impacting FIRSTHOLDCO’s recapitalisation efforts either, as dividend payments have minimal effect on its share price given its base of wealthy shareholders who can provide market support.
We, however, see a potential adverse impact for UBA, FIDELITYBANK, and FCMB, as these banks still need to raise additional capital to meet the CBN’s N500 billion minimum paid-in capital requirement for internationally licensed banks.
The impact is starkest for Zenith Bank, which has the highest forbearance exposure among covered institutions at 23 per cent of gross loans totaling to $1.6 billion. First Bank trails with $887 million, while Access Bank’s exposure stands at $304 million. For each of these institutions, regulatory forbearance has evolved from a mere asset quality issue into a substantial cash flow constraint, as cash profits fall sharply below accounting profits.
Access Holdings, for instance, reported negative cash profits of N702.5 billion in FY2024 despite declaring accounting profits of N867 billion. The shortfall reflects a N1.5 trillion gap between interest income earned and interest income received, highlighting the drag from underperforming loans and unrealised FX gains.
Renaissance Capital, adding that investors should now track cash profitability more closely than accounting profits said “dividend payouts require actual cash. The higher the forbearance exposure, the lower the cash profits—posing direct implications for dividend sustainability.”
GTCO and UBA, however, stand out as exceptions. GTCO has zero forbearance exposure after proactively provisioning last year, while UBA’s exposure is modest at about 6% of its loan book. Both institutions have maintained positive cash profits and are expected to continue paying dividends, with UBA potentially resuming full payouts by 2026.
In contrast, Fidelity Bank and FCMB, though smaller, also face dividend constraints due to their forbearance exposures of 10 and eight per cents respectively. Compounding their challenge is the need to raise N194.4 billion and N233.8 billion respectively to meet the CBN’s N500 billion capital requirement for international banks—potentially at discounted valuations if share prices weaken due to the dividend freeze.
Renaissance Capital cautioned that the sector’s valuation multiples, adjusted for forbearance risk, have declined. “Our near-term outlook on Nigerian banks has turned partly bearish due to the immediate and aggressive enforcement of the CBN’s policy,” the analysts said, noting that Access Bank and Zenith Bank may be forced to rely on non-dividend strategic appeals to retain investor confidence.
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