CBN orders banks under regulatory support to suspend dividends, executive bonuses

THE Central Bank of Nigeria (CBN) has directed banks operating under regulatory forbearance to immediately suspend dividend payments, defer executive bonuses, and halt investments in foreign subsidiaries or offshore ventures.

This directive, announced in a statement issued on Friday, was part of a broader effort by the apex bank to preserve capital within the banking system and ensure financial stability. According to the statement signed by Olubukola Akinwunmi, Director of Banking Supervision, the suspension will remain in effect until the CBN independently verifies that affected banks have adequate capital and provisioning levels in line with prevailing regulatory standards.

“This temporary suspension is until such a time as the regulatory forbearance is fully exited and the banks’ capital adequacy and provisioning levels are independently verified to be fully compliant with prevailing standards,” the CBN said. “This supervisory measure is intended to ensure that internal resources are retained to meet existing and future obligations and to support the orderly restoration of sound prudential positions.”

The CBN’s latest move comes as Nigerian banks face a phased recapitalisation process expected to run until 2026. The suspension is designed to bolster capital buffers, enhance balance sheet resilience, and reduce risk exposure during a period of economic uncertainty marked by foreign exchange volatility and inflationary pressures.

The directive also reflected the CBN’s heightened focus on corporate governance and prudent financial management. By restricting profit distribution and high-level compensation, the central bank is signalling a stricter stance on how banks allocate internal resources—especially those still benefiting from forbearance granted during the COVID-19 crisis.

This is not the first time the CBN has introduced restrictions to manage banking sector risks. In April 2022, it extended interest rate forbearance on loans to help banks manage pandemic-related stress. More recently, in September 2023, the apex bank barred banks from using foreign exchange (FX) revaluation gains for dividends or capital expenditures, in a bid to curb the misapplication of temporary profits.

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The new directive built on those measures, not only restricting how profits can be used but also placing limits on who may benefit from them. This expansion of control suggests a more proactive regulatory posture aimed at maintaining sector-wide stability.

The International Monetary Fund (IMF) has previously supported such cautionary measures. In its Article IV consultation report released last year, the IMF advised the CBN to unwind COVID-era regulatory forbearance and restore normal supervisory standards. The Fund emphasised that delayed action could lead to the buildup of systemic risks if capital buffers remained weak.

By following this advice, the CBN appears to be aligning its regulatory practices with global standards while safeguarding against potential future crises.

For Nigerian banks under regulatory watch, the message is clear: capital preservation and risk mitigation must take precedence over profit distribution and expansion plans. As the regulator tightens oversight and the sector heads into deeper rounds of recapitalisation, institutions will need to adopt more conservative strategies to remain in good standing.

The CBN has not specified how many banks are affected by this directive, but analysts suggest that it could apply to several mid-tier and smaller institutions currently navigating post-pandemic challenges.

As economic conditions remain uncertain, the central bank’s tightening of capital controls underscores its commitment to a stronger, more resilient financial system.

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