- By Dr Tope Fasoranti
The Central Bank of Nigeria (CBN) has again demonstrated its commitment to maintaining a resilient and stable banking sector.
On June 13, 2025, the apex bank issued a directive temporarily suspending dividend payments, bonuses, and foreign subsidiary investments for banks operating under regulatory forbearance.
This measured intervention reflects the regulator’s proactive stance in safeguarding Nigeria’s financial system during a critical transitional period.
The directive addresses banks currently benefiting from credit or Single Obligor Limit (SOL) forbearance arrangements. The three-pronged approach is straightforward and targeted: suspend shareholder dividends, defer executive bonuses, and halt foreign subsidiary investments until capital adequacy and provisioning levels achieve full compliance with prevailing standards.
This supervisory action deserves commendation for its strategic timing and precision. As Nigeria’s banking sector continues to navigate complex economic conditions, including foreign exchange volatility and evolving credit landscapes, the CBN’s emphasis on capital retention demonstrates forward-thinking leadership. The measures ensure that financial institutions maintain adequate buffers to absorb potential shocks whilst supporting the broader economy’s recovery trajectory.
The temporary nature of these restrictions is particularly noteworthy. Rather than imposing permanent constraints, the CBN has established clear exit criteria tied to regulatory compliance and capital restoration. This approach balances prudential oversight with the banking sector’s long-term growth aspirations, acknowledging that healthy banks are essential for sustainable economic development.
From a macroeconomic perspective, these measures align with broader policy coordination efforts that have characterised Nigeria’s recent economic management. Just as the CBN’s earlier disclosure of foreign exchange reserves boosted market confidence, this latest intervention signals institutional maturity and regulatory sophistication. The emphasis on internal capital retention during this transitional period mirrors best practices adopted by central banks globally during periods of financial system recalibration.
Similar measures have been implemented across different jurisdictions during times of economic stress. The European Central Bank restricted dividend payments for eurozone banks during the COVID-19 pandemic, maintaining these restrictions until capital positions were deemed sufficiently robust.
The Bank of England imposed comparable limitations on UK banks in 2020, suspending dividends and variable remuneration to preserve capital buffers. In Asia, the Monetary Authority of Singapore directed banks to exercise prudence in dividend distributions during periods of heightened uncertainty, whilst the Reserve Bank of India has historically used similar tools to strengthen banking sector resilience during economic transitions.
The directive also reflects lessons learned from previous banking sector challenges and international experience. The 2008 global financial crisis highlighted the importance of maintaining adequate capital buffers, leading regulators worldwide to adopt more stringent oversight frameworks.
The Federal Reserve’s Comprehensive Capital Analysis and Review (CCAR) programme, introduced post-crisis, similarly restricts capital distributions for banks that fail stress tests. By acting preemptively to strengthen capital positions, the CBN is addressing vulnerabilities before they crystallise into systemic risks, following the playbook established by leading international regulators.
For affected banks, compliance with these measures represents an opportunity to rebuild balance sheet strength whilst maintaining stakeholder confidence. The temporary nature of the restrictions means that institutions demonstrating robust capital management and risk controls can expect a return to normal dividend and investment policies once regulatory requirements are fully satisfied.
Market participants should view these measures as evidence of regulatory vigilance rather than sector weakness. International experience shows that early intervention measures often prevent more severe disruptions and support long-term financial stability.
The success of such approaches is well-documented: European banks that complied with ECB dividend restrictions during the pandemic emerged with stronger capital positions, whilst the Federal Reserve’s stress testing regime has contributed to the resilience of the US banking system. The CBN’s willingness to take decisive action reinforces Nigeria’s commitment to maintaining international banking standards and regulatory best practices.
The broader implications extend beyond individual institutions to encompass systemic stability. By ensuring that banks maintain adequate capital buffers, the CBN is supporting the sector’s capacity to continue financing economic activity whilst managing emerging risks. This approach protects depositors, maintains market confidence, and preserves the banking sector’s critical role in Nigeria’s economic transformation.
Looking ahead, the success of these measures will depend on effective implementation and clear communication with stakeholders. The CBN’s track record suggests that affected banks will receive appropriate guidance and support throughout the compliance period. Regular monitoring and transparent progress reporting will be essential to maintaining market confidence and ensuring the orderly restoration of normal operations.
The temporary suspension of dividends, bonuses, and foreign investments represents prudent banking supervision at its finest. Rather than constraining growth, these measures create conditions for sustainable expansion built on solid foundations. The CBN deserves recognition for prioritising long-term stability over short-term considerations and for maintaining Nigeria’s reputation as a jurisdiction committed to sound financial sector governance.
As Nigeria continues its journey towards greater economic stability and international competitiveness, measures like these demonstrate that the country’s financial infrastructure is managed by capable hands committed to excellence.
- Dr Tope Fasoranti is an Economist, Banker, and Consultant on Digital Transformation
