The NGX Banking Index, which tracks listed Nigerian banks, ended August 2025 in the red, with the decline extending into early September and dipping below the 1,500 daily support level.
Starting the year on a strong note, the index opened at 1,084.5 and climbed more than 48% to peak above 1,610 by July, as banking stocks rallied.
However, the 5% drop in August created a dip and weighed on the broader All-Share Index, which barely closed in the green, up 0.31%.
While the NGX Banking Index does not house every listed bank, it contains 10 major players whose size and capitalization allow them to influence both the sub-index and the broader market.
At the center of this influence are the FUGAZ banks: FirstHoldCo, UBA, GTCO, Access Holdings, and Zenith.
- These tier-one lenders are not only the most liquid in the sector but also the most closely watched, with their corporate actions often setting the tone for the market.
So far, only FirstHoldCo has released its Q2 results, while investors await reports from the others with growing anticipation.
Analysts believe these releases could spark fresh sentiment, lifting the index from the 1,500–1,550 zone and reigniting momentum in the sector and across the market.
Forbearance
Samuel Oyekanmi, Research and Insight Lead at Norrenberger Financial Group, believes that more banks leaving the CBN’s forbearance list could set off an upward rally in the sector.
“For a short-term burst that could push the index past the 1,600-resistance zone, news of banks exiting CBN’s exposure is key,” he explained.
He added that banks freed from forbearance would be better positioned to pay dividends, a factor that often drives confidence in the Nigerian market.
“Dividend sentiment drives the market here. Once banks announce they’re off that list, it will likely steady the sector.”
- Forbearance, often used by central banks during periods of economic stress such as the COVID-19 pandemic, allows lenders flexibility in loan classification and reporting.
In a circular issued in mid-June 2025, the Central Bank of Nigeria directed all banks still under regulatory forbearance to suspend dividend payments, defer bonuses, and halt investments in foreign subsidiaries, signaling that with the pandemic now over, banks would no longer continue to enjoy such relief.
Estimates from Renaissance Capital show that Zenith Bank, First Bank, and Access Bank carry the highest exposure, while tier-two lenders like Fidelity and FCMB are also affected.
By contrast, GTCO and Stanbic IBTC have no exposure, having already cleaned up their loan books.
The report also noted that defaulting banks are unlikely to resume dividend payments until 2028. In the meantime, any payouts would come from non-banking subsidiaries of the affected groups.
Despite these constraints, Oyekanmi pointed out that the market has stayed largely calm.
He noted that the upcoming half-year results of the remaining FUGAZ banks could be the real catalyst; if the numbers are strong, they may lift the index out of its current dip.
H2 performance
According to Oghentega Idogun, an analyst at MetaMacro, the second-quarter results of the remaining banks—apart from FirstHold—will be crucial in shaping market sentiment for the rest of the year.
“Bank performance is always a key driver. As you know, the CBN has yet to approve the second-quarter numbers for some banks,” he explained. “If those results turn out strong, they could boost investor confidence.”
On the 1,500–1,600 daily support zone, Idogun was optimistic:
“A break above 1,600 is possible if performance comes in right.”
He also outlined three possible scenarios:
- Stronger-than-expected results: FUGAZ stocks rally, lifting the broader market.
- In-line results: Softer, more modest moves.
- Weaker-than-expected results: A brief sell-off.
“FUGAZ stocks are market movers,” he stressed.
A CardinalStone analyst, who preferred not to be named, shared a similar view.
In his words, “We expect a mix of good earnings and interim dividends to drive the sector forward, provided results meet expectations.”
With banks acting as market drivers, sentiment from strong earnings, dividend declarations, and more institutions exiting forbearance could be enough to push the sector decisively above the 1,600-mark.
