Nigerian banking stocks experienced heavy losses on Monday, following the Central Bank of Nigeria’s (CBN) announcement ending the regulatory forbearance regime introduced during the COVID-19 crisis.
The Nigerian Exchange (NGX) All-Share Index slipped into negative territory in intraday trading as sell-offs intensified in the financial sector. Market brokers indicated a wave of bearish sentiment had swept across banking stocks ahead of expected inflation data.
Despite reporting strong earnings, Nigerian banks are now grappling with the end of leniency on non-performing loans and regulatory thresholds. The financial relief measures had allowed banks to manage impaired assets with more flexibility, but the abrupt policy reversal has triggered investor fears over capital adequacy and dividend restrictions.
Leading the losses was Oando Plc, which dropped 8.70%, followed closely by First Holdings, down 7.80%. Shares of FCMB slumped by 7.58%, with Fidelity Bank, Zenith Bank, and Access Holdings also experiencing steep declines of 6.49%, 5.98%, and 5.15%, respectively.
Other notable fallers included UBA (-4.70%), Jaiz Bank (-4.02%), Sterling Bank (-3.29%), and Wema Bank (-0.72%). GTCO and Dangote Sugar also posted marginal declines of 0.70% and 0.24%, respectively.
In a circular dated June 13, 2025, the CBN instructed banks under forbearance, particularly those exceeding credit exposure and Single Obligor Limits, to immediately suspend dividend payments. The directive also restricts bonuses to directors and bars fresh foreign expansion or offshore investments.
Signed by Olubukola A. Akinwunmi, Director of Banking Supervision, the new policy aims to shore up bank capital buffers and fortify the financial system. The restrictions will remain until banks demonstrate full regulatory compliance, verified through independent audits.
CSL Stockbrokers warned that the dividend suspension could dampen investor confidence, especially among income-focused shareholders. Analysts also expect rising provisioning requirements and a potential increase in reported non-performing loan (NPL) ratios.
Additionally, capital adequacy ratios may come under pressure, particularly in banks with large exposures or thin profit margins. CSL notes that the timeline for recovery from these effects will vary across institutions based on asset quality, profitability, and existing capital strength.
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