A new research note by Renaissance Capital has revealed that several of Nigeria’s most prominent banks are facing significant exposure to regulatory forbearance loans.
The report titled “Nigerian Banks, Cash is King” suggests some are now likely to suspend dividend payments for multiple years as they work to meet stricter prudential standards imposed by the Central Bank of Nigeria (CBN).
The notice follows a June 13 directive from the CBN, instructing banks with unresolved forbearance exposures to halt dividend payments, defer executive bonuses, and suspend all new investments in offshore subsidiaries.
“Following the CBN’s directive, we expect the banking arms of ACCESSCORP, FIRSTHOLDCO, and ZENITHBANK to pause dividend payments until they have fully provided for their forbearance exposure and single obligor limit exposures.
“Specifically, 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.”
The aim, the CBN said, is to strengthen capital buffers and ensure adequate provisioning against impaired loans, especially those that risk breaching the regulatory Single Obligor Limit (SOL).
The suspension is expected to remain in place until affected banks have fully provisioned for their forbearance exposures and phased them out entirely.
For several banks under coverage, analysts at Renaissance Capital expect both interim and final dividends to be paused indefinitely.
An earlier report by Renaissance Capital, published by Nairametrics, indicated that nearly all Nigerian banks had some level of exposure to forbearance-related loans and could face restrictions on dividend payments.
However, the analysis was based on data from the first half of 2024 and may not account for the significant progress some banks have made since then in addressing these exposures, hence the need for the latest update.
What RENCAP is saying
According to Renaissance Capital’s estimates, Zenith Bank, FirstBank, and Access Bank rank highest in terms of forbearance exposure.
- The research notes that Zenith Bank carries forbearance loans equivalent to 23% of its gross loan book, FirstBank has an exposure of 14%, and Access Bank stands at 4%.
- Tier-II lenders are also affected, with Fidelity Bank and FCMB carrying exposures of 10% and 8% respectively.
- In contrast, GTCO and Stanbic IBTC have zero exposure to forbearance loans, having already cleaned up their books.
- GTCO, in particular, had proactively provisioned for and written off these exposures as of December 2024.
According to the report, estimates for GTCO, UBA, Fidelity, and FCMB were based on recent management engagements, while the forecast for Zenith Bank was drawn from a December 2024 interaction.
Breakdown of Forbearance estimates
In absolute terms, exposures remain significant. Renaissance Capital estimates Zenith Bank’s total forbearance exposure at $1.6 billion, followed by FirstBank at $887 million and Access Bank at $304 million.
The report presented the figures in U.S. dollars.
Other notable exposures include Fidelity Bank at $296 million, UBA at $282 million, and FCMB at $134 million. Rencap stated their figures in United States Dollars.
- Meanwhile, FCMB Group Plc has moved to reassure investors.
- In a statement issued Monday, the bank confirmed that it has made significant progress in reducing its exposure to loans under regulatory forbearance, bringing down the total from N538.8 billion in September 2024 to N207.6 billion as of May 31, 2025.
- FCMB expects these loans to fully exit the forbearance regime in the near term, which will likely lead to a temporary increase in Stage 3 non-performing loans, peaking around 11.5% of the total loan portfolio before declining to below 10% by year-end, aided by anticipated loan growth.
- It also stated that it is still planned to pay dividends from its other subsidiary companies.
Other banks are yet to release statements. However, sources in Zenith Bank indicate there are plans to exit forbearance loans by the end of the year, stating that the bank’s profit is significant enough to cover for the forbearance loans.
Concerns over breaches of single obligor limits
Beyond the scale of these exposures, the Rencap also flags concerns over potential regulatory breaches.
- Specifically, FirstBank, Fidelity Bank, and Zenith Bank are believed to be at risk of breaching the CBN’s Single Obligor Limit, a threshold designed to prevent over-concentration of credit risk in a single borrower or sector.
- While not all forbearance loans are tied to a single client, the exposures are believed to be heavily concentrated in Nigeria’s oil and gas sector, particularly in upstream operations and refinery projects.
- FCMB was noted as compliant, with its largest forbearance exposure to a single counterparty standing at $68.1 million, well below its regulatory ceiling of $94 million.
The report also stated that cash profits are now a more meaningful indicator of bank performance than reported earnings, given the distortions caused by Nigeria’s financial reporting standards.
Under current IFRS rules, banks can recognize interest income on restructured or at-risk loans (classified as Stage 2) even when no cash is received, leading to a disconnect between what is reported and the actual liquidity available to fund dividends, repay obligations, or absorb losses.
No Dividends until 2028
Following the CBN’s directive, Access Bank, FirstBank, and Zenith Bank are expected to suspend dividend payments from their banking arms until at least 2028, pending full provisioning for their forbearance and single obligor exposures.
- While dividends may still come from their non-banking subsidiaries, these units contribute only a fraction of group earnings, making any substantial payout unlikely in the short term.
- This means dividends will still be paid, but not from their main banking subsidiaries.
- UBA presents a more favourable outlook, with dividend resumption projected by 2026, supported by strong cash profits and relatively modest forbearance exposure.
- GTCO remains in the best position, having already provisioned for its exposures, and is not expected to halt dividends now or in the near future.
Meanwhile, sources at First HoldCo, the parent company of FirstBank, responded to the Rencap report by highlighting the group’s strong shareholder backing, which they say will support its recapitalization efforts.
They also pointed to the bank’s attractive valuation for long-term investors, potential upside from a possible review of the CRR regime, and the continued strength of its core banking operations, underpinned by sustainably improving income growth.
Download the report – Renaissance Capital Africa Research – Nigerian Banks – Cash is king
I believe cbn will change their forbearance policy to revive shares of these companies
Those at the helm of affairs at the CBN need to sit down and critically look at what they are doing to investors. A lot of people have already lost millions because they invested in fundamentally sound stocks., The CBN successfully turned an exercise that could easily have been done behind the curtain into an event that led to massive panic in the market. Who will take responsibility for the insensitivity? I believe all the President wants is stability and prosperity for investors. These banks are in the middle of raising capital. How on earth is the NO DIVIDEND POLICY supposed to help them? It’s not like these institutions are loss-making; they just needed to be reminded of the need to wind down their forbearance exposures, which could have been done in a closed-door meeting.
I join you @Abdullahi to sincerely pray that the CBN will backtrack and extend the implementation of this policy till 2027.