CBN Forbearance: Shareholder Returns Under Threat, Banks Seek Exit Strategies

Shareholders of different banks have appealed to financial institutions to redouble their efforts toward exiting the Central Bank of Nigeria’s (CBN’s) regulatory forbearance.

The News Agency of Nigeria (NAN) reports that forbearance is implemented by a government or regulatory agency to temporarily suspend some regulations to provide relief to businesses or banks facing financial difficulties and unable to repay their loans under certain terms and conditions.

Mrs Bisi Bakare, the National Coordinator of Pragmatic Shareholders Association, told the News Agency of Nigeria (NAN) in Abuja on Monday that the timing for the directive was inappropriate.

Bakare said the CBN’s directive had cut short the expectations of shareholders on the receipt of dividends and capital appreciation on their investment in the banks.

She recalled that the same CBN mandated the banks to raise capital and most investors responded by increasing their shares.

”This was done with the expectation of getting dividends, but this directive will truncate such desires.

”We note that the timing is not adequate as you cannot shift a goal post when the match is on.

”Hence much as we acknowledge the benefit of this circular which is to ensure a strong capital base for the banks and to strengthen their resilience and stability, we believe that effort must be made by affected banks to exit the forbearance.

”The banks need to exit this and position themselves for dividend payment to their respective shareholders,” she said.

Mr Moses Igbrude, the National Coordinator of the Independent Shareholders Association of Nigeria, stressed the need for the directive to be managed by the Boards and management of banks in a way that dividend payment would not be disrupted.

According to him, the CBN’s initial forbearance extension was intended to maintain stability and prevent disruption, which has been appreciated by investors and Nigerians alike.

”When rolling back this directive, it is crucial to structure and manage the transition carefully with all stakeholders to avoid instability and maintain the stability that was initially intended.

”Banks involved have come out with various options they intend to exit these forbearances and how the directive will not affect their dividends payment plan.

Mrs Catherine Omale, a shareholder in some of the banks under CBN’s forbearance, lamented that the directive was not in the interest of shareholders.

Omale said that dividend payment by banks was the only thing that she had benefited from her banks, as she was not receiving interest on her savings account.

”I invested in the just concluded public offer by my banks hoping to get returns on my investment but now, it is under probability.

”The only thing I receive from my banks is dividends, and now that the CBN wants them to suspend it, what will be my benefit?

Meanwhile, some of the banks alleged to be affected by the forbearance said that they could still pay dividends to shareholders.

First HoldCo said it was committed to paying dividends in the 2025 financial year and beyond in spite of its forbearance exposure.

First HoldCo in a statement filed on the platform of the Nigerian Exchange Limited, said that due to its diversified financial holding Company, it would sustain its dividend payments in 2025 and beyond.

Reports say that banks suspected to be under regulatory forbearance include Access, First HoldCo, Zenith, Fidelity, and First City Monument Bank (FCM). And United Bank for Africa (UBA Plc).

NAN reports that the CBN had directed banks operating under regulatory forbearance to suspend dividend payments, defer bonuses for executives, and halt investments in foreign subsidiaries or offshore ventures.

This temporary suspension, according to the CBN, is part of a strategy to reinforce capital buffers, improve balance sheet resilience, and ensure prudent capital retention within the banking sector.

The directive applies specifically to banks currently benefiting from forbearance regarding credit exposures and Single Obligor Limit (SOL) breach conditions that suggest potential stress in the affected institutions.

The CBN said the suspension would remain until it is able to independently verify the capital adequacy of the banks. (NAN)