June 16, 2025/CSL Research

On 13 June 2025, the Central Bank of Nigeria (CBN) issued a circular directing banks currently under regulatory forbearance, particularly with respect to credit exposures and Single Obligor Limits (SOL), to immediately:

• Suspend dividend payments to shareholders
• Defer bonuses to directors and senior management
• Halt new offshore investments or expansion into foreign subsidiaries

The directive, signed by Olubukola A. Akinwunmi, Director of Banking Supervision, aims to reinforce the resilience of Nigeria’s banking sector by improving capital buffers and strengthening balance sheets. These restrictions will remain in place until the affected banks fully exit the forbearance regime and demonstrate compliance with capital adequacy and provisioning standards—validated through independent assessments.

Background: Understanding the Forbearance Regime
CBN’s regulatory forbearance framework began in 2016 as a temporary relief for banks dealing with rising non-performing loans (NPLs). It was expanded significantly in March 2020 in response to the COVID-19 pandemic, through circular FPR/DIR/GEN/CIR/07/049, which offered:

• A 12-month moratorium on principal repayments for CBN intervention loans

• Interest rate reductions from 9% to 5% on those facilities
• Permission to restructure affected loans

The interest subsidy was later extended until April 2023, while a December 2024 deadline was set for banks to exit the forbearance regime. This deadline was recently extended by 6 months to end-June 2025, offering banks additional time to fully regularise their books.

The current credit forbearance takes two forms:

• Recognition Forbearance – Delayed classification of some loans as NPLs

• Provision Forbearance – Delayed provisioning for affected loans

Some banks, despite delaying the formal recognition of these loans as non-performing, may have leveraged windfall foreign exchange gains from the naira devaluation to gradually increase provisions. It is important to note that most of these forbearance loans originated from the oil and gas sector and are typically classified as Stage 2 loans under IFRS 9—indicating a significant increase in credit risk but not yet defaulted.

Kindly click on the below link to download the full report.

​Banks’ Flash note – End of Forbearance Regime.pdf​​​​​

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