Olufemi Adeyemi 

CBN Tightens Oversight on Banks Under Forbearance: Dividend Payouts, Executive Bonuses, and Offshore Investments Suspended

Strengthening the System: CBN Prioritizes Capital Retention

In a strategic move aimed at enhancing the resilience of Nigeria's banking sector, the Central Bank of Nigeria (CBN) has directed all banks currently under regulatory forbearance to temporarily suspend dividend distributions, defer executive bonuses, and halt any new offshore investments or foreign subsidiary ventures. This decisive step, the CBN says, is intended to safeguard capital and reinforce the financial stability of institutions showing early signs of stress.

The directive, issued as part of broader supervisory measures, targets banks that have received temporary regulatory leniency on certain prudential guidelines—particularly those relating to credit exposures and breaches of the Single Obligor Limit (SOL). These conditions often reflect underlying financial vulnerabilities or capital inadequacies.

According to the apex bank, the restrictions will remain in effect until each affected institution fully exits the forbearance regime and can demonstrate, through independent verification, that their capital adequacy and loan provisioning meet current regulatory standards.

Details of the Directive: What It Means for Affected Banks

The CBN has clearly outlined the obligations of the impacted banks under this new directive. Until further notice, these institutions are required to:

  • Suspend all dividend payments to shareholders.
  • Defer performance bonuses for directors and senior management staff.
  • Cease new investments in foreign subsidiaries or other offshore ventures.

These restrictions are designed not merely as punitive measures but as preventive steps to ensure that internal financial resources are preserved and allocated toward strengthening the banks’ balance sheets and improving overall solvency.

The CBN emphasized that “this temporary suspension is until such a time as the regulatory forbearance is fully exited and the banks’ capital adequacy and provisioning levels are independently verified to be fully compliant with prevailing standards.”

Capital Preservation in a Volatile Environment

Analysts view this move as a clear signal that the CBN is pivoting from a posture of relief toward one of increased discipline and prudence. The Nigerian financial sector is currently in the midst of a major recapitalization drive, with new capital thresholds scheduled to be rolled out in phases leading up to 2026.

With inflation pressures, exchange rate volatility, and heightened exposure to credit risks—especially in vulnerable sectors—the regulator is reinforcing its emphasis on capital preservation. By curbing discretionary financial outflows, the CBN aims to ensure that banks retain sufficient buffers to absorb shocks and remain solvent.

Part of a Broader Regulatory Trend

This is not the first time the CBN has introduced stringent control measures targeting the capital positions of Nigerian banks. In April 2022, the apex bank extended interest rate forbearance on certain loans, allowing banks to delay recognition of potential losses incurred during the COVID-19 pandemic. While helpful for borrowers, this measure exposed banks to higher latent credit risks.

Later, in September 2023, the CBN issued a circular instructing banks to isolate profits from foreign exchange (FX) revaluation in a dedicated “Special Regulatory Reserve,” prohibiting their use for dividends or capital projects. This stance was reiterated in March 2024, when the regulator warned against using such volatile FX gains for shareholder distributions, emphasizing the temporary nature of those windfalls.

With this latest directive, the CBN has widened its scope—restricting not just the use of certain profits but also the recipients (executives and shareholders) and the destinations (foreign ventures) of those profits. It marks an evolution in regulatory posture aimed at driving long-term prudence and systemic stability.

Conclusion: CBN Draws a Firmer Line on Bank Risk Management

As Nigeria’s financial sector undergoes transformation amid macroeconomic uncertainty, the CBN is tightening the reins to enforce capital discipline, especially among institutions already flagged for regulatory support. This latest move underscores the central bank’s commitment to ensuring that banking institutions remain resilient, adequately capitalized, and responsibly governed as the country navigates its economic recovery and financial reforms.