Fitch Ratings has revealed that while most banks are expected to exit the regulatory forbearance regime by December 2025, a select few will continue operating under forbearance beyond the period.
Though no specific bank was mentioned, the credit rating agency added that this will be subject to stringent penalties, including a prohibition on dividend payments.
This development comes amid broader efforts by the Central Bank of Nigeria (CBN) to reinforce financial stability and ensure banks enter 2026 with stronger capital buffers and cleaner balance sheets.
Penalties for Extended Forbearance
According to Fitch’s latest peer credit analysis, banks that remain under forbearance will be restricted from paying dividends, issuing executive bonuses, or making foreign investments.
These measures, introduced by the CBN in June, target institutions that have breached credit exposure limits and Single Obligor Limits (SOL), the maximum loan amount a bank can extend to a single borrower relative to its net worth.
The CBN’s directive is designed to compel banks to recognize and address loan risks now rather than defer them, thereby improving transparency and resilience across the sector.
“This move aims to strengthen financial institutions by reinforcing capital buffers and improving balance sheet resilience,” Fitch noted.
Loan Reclassifications and Capital Pressures
The expiration of forbearance is expected to trigger the reclassification of several large Stage 2 loans as impaired, which could lead to increased loan impairment charges and pressure on total capital adequacy ratios.
However, Fitch reports that most Nigerian banks are well-positioned to absorb these shocks, thanks to proactive restructuring of Stage 2 loans, recent capital raisings, and improved net interest margins that have enhanced loss-absorption capacity.
The recapitalization drive, spurred by the CBN’s revised paid-in capital requirements, has led to a wave of equity injections and strategic mergers across the sector, further bolstering banks’ readiness for post-forbearance operations.
FX Liquidity and Eurobond Outlook
Despite macroeconomic headwinds, the naira’s devaluation has had a positive impact on foreign-currency liquidity, increasing turnover in the FX market.
Fitch also noted that Nigerian banks are well-equipped to meet their Eurobond obligations, with USD2.2 billion in bonds maturing or callable by end-2026. Most institutions are expected to fulfill these commitments without requiring refinancing.
As the sector transitions out of regulatory forbearance, analysts anticipate a more transparent and resilient banking landscape, better aligned with global standards and investor expectations.
What You Should Know
- Last month, the Central Bank of Nigeria (CBN) confirmed that eight Nigerian banks have met the minimum regulatory requirements under the current forbearance regime.
- This was disclosed by CBN Governor Yemi Cardoso during the Monetary Policy Committee (MPC) briefing held on July 22, 2025.
Why is CBN Doing This
Nairametrics analysts suggest the CBN appears to be signaling a shift from relief to discipline.
The Nigerian banking sector is currently undergoing a major recapitalization push, with new capital thresholds set to be implemented in phases up to 2026.
Thus, the move indicates the need for capital preservation, especially in light of FX volatility, inflation, and exposure to risky sectors.
This is the latest in a series of increasingly tight controls by the apex bank aimed at reining in excessive risk-taking and capital mismanagement by banks.
