June 19, 2025/CSL Research
The Central Bank of Nigeria (CBN) has reaffirmed the strength and resilience of the Nigerian banking sector, following recent regulatory directives. On 13 June 2025, the CBN released a circular directing banks currently under regulatory forbearance—specifically in relation to credit exposures and Single Obligor Limits (SOL)—to immediately suspend dividend payments to shareholders, defer bonuses to directors and senior management, and halt new offshore investments or expansion into foreign subsidiaries (See CSL Research Flash Note “CBN Wielding the Stick Yet Again; End of the Forbearance Regime?”). In a follow-up statement issued yesterday, the Acting Director of Corporate Communications, Mrs. Hakama Sidi Ali, emphasized that the measures apply only to a limited number of banks that are finalizing their transition from temporary regulatory support.
To support a smooth and orderly adjustment, the CBN has also introduced limited, time-bound flexibility within the capital framework, consistent with international regulatory norms. Particularly, the CBN notes that the step is part of a broader sequenced strategy to implement the recapitalisation programme announced in 2023—which requires international banks, national banks, and regional banks to secure minimum capital base of ₦500 billion, ₦200 billion, and ₦50 billion respectively—in alignment with Nigeria’s long-term growth ambitions, and which has already led to significant capital inflows and balance sheet strengthening across the sector. Most banks have either completed or are on track to meet the new capital requirements well before the final implementation deadline of 31 March 2026.
On the domestic bourse, investors reacted sharply to the news in the first two trading days of the week, with the NGX Banking Index (NGXBNK Index) declining by over 4.00%. Key banking stocks led the decliners as the market weighed the potential impact on corporate actions and broader sector performance. However, sentiment has since improved, following a series of reassuring communications from the Central Bank and detailed disclosures by financial institutions outlining their specific exposures and mitigation strategies.
These efforts have helped to calm market nerves and restore investor confidence. Reflecting this shift, the NGXBNK Index rebounded by 3.25% on the third trading day of the week, significantly trimming its week-to-date loss to just 1.06%. The recovery was driven by notable price gains across major Tier 1 and Tier 2 banking stocks, indicating renewed investor interest and a more measured outlook toward the sector.
As noted in our previously published flash note, we do not foresee any systemic risk to the banking sector. A number of institutions have already been actively working toward compliance with the Central Bank of Nigeria’s (CBN) directives, well ahead of the June 2025 deadline. This proactive approach has been reflected in recent corporate disclosures and investor communications. We reiterate our view that the CBN’s actions are aimed at enhancing prudential discipline and promoting long-term sectoral resilience. Although there may be modest near-term impacts on earnings and capital buffers, the measures are fundamentally constructive for the long-term health and stability of the banking industry.
Investors are advised to remain focused on the underlying fundamentals of individual banks, many of which have demonstrated robust capital positions and sound risk management frameworks.
Click here to download full report: CSL Nigeria Daily – 19 June 2025 – Banks.pdf
