• CBN bars undercapitalized banks from dividends, bonuses, and offshore investments.

• Move aims to boost capital and address bad loans before March 2026 deadline.

• Critics fear impact on investor confidence and fundraising.
  

The Central Bank of Nigeria (CBN) has temporarily barred banks that have not yet met new capital requirements from paying dividends and bonuses. The directive, announced Tuesday, June 17, aims to compel affected banks to retain earnings and strengthen their financial position.

Just days earlier, the CBN issued a circular ordering banks under regulatory forbearance to suspend dividend payments, defer bonuses for directors and senior executives, and halt investments in foreign subsidiaries or offshore companies. According to the regulator, the goal is to increase available capital and support long-term financial stability in the banking sector.

Adetilewa Adebajo, CEO of CFG Advisory, stated that the move focuses on capital positions and provisioning adequacy to address issues within banks' loan portfolios once and for all. He added that all banks wishing to continue paying dividends must make full provisions for their Non-Performing Loans (NPLs), which will invariably impact their profitability. As part of recapitalization, Adebajo noted, new funds should be used to clean up and strengthen risk asset portfolios. Forgoing dividends, bonuses, and offshore investments obviously improves capital retention and should boost share value.

However, some market participants have voiced concern. Sam Onukwue, president of the Association of Stockbroking Houses of Nigeria (ASHON), warned that the indefinite suspension might erode investor confidence in the banking sector, potentially triggering sell-offs of bank stocks on the Nigerian Exchange (NGX). He suggested the CBN could have managed this situation more discreetly to avoid speculation and market volatility. “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,” he also cautioned. 

The CBN, meanwhile, reassured that most Nigerian banks have already complied with the recapitalization requirements or are on track to do so by the March 2026 deadline. It also pledged to continue engaging with the banks to ensure smooth implementation of the rules.

As of late May, Nigeria’s Securities and Exchange Commission (SEC) reported that publicly listed companies, including banks, declared dividends totaling NGN1.1 trillion ($712 million) in 2024, with nearly NGN1 trillion already distributed to shareholders.