The recent dip in banking stocks triggered by the Central Bank of Nigeria’s (CBN) new forbearance policy may be more of an opportunity than a threat, according to Ugodre Obi-Chukwu, CEO of Naijaonpoint.
Speaking on the business show MoneyLine with Nancy, during a segment titled “CBN Policy on Forbearance,” Mr. Obi-Chukwu suggested that the decline in banking stocks could offer attractive entry points for value-focused investors.
Asked whether this is a good time to buy into the banking sector, he said:
“I’m a fundamental investor. I always like to buy when prices are low. With the current drop in share prices and the strong fundamentals many Nigerian banks still maintain, this could be a great opportunity.”
He noted that while the market sentiment around the banking sector has been shaken by the CBN’s policy, Nigerian banks have historically demonstrated resilience.
“These banks survived previous recapitalization shocks that also led to share price declines, and they bounced back. I don’t think this will be any different.”
Mr. Obi-Chikwu explained that many of the loans under forbearance are tied to the oil and gas sector, which has started to perform better due to rising oil prices. As a result, banks are now in a stronger position to recover these funds and potentially exit the forbearance list more quickly.
He expressed optimism about FUGAZ banks, especially Zenith Bank, stating they are financially strong and well-positioned to meet CBN requirements, with many likely to exit the forbearance list by the third quarter.
While dividend payouts may be affected, Mr. Obi-Chukwu noted that many of these banks have subsidiaries that can still upstream earnings to support shareholder returns, though perhaps not as strongly as in previous periods.
On the broader market sentiment, the CEO stated that investors will adjust over time.
“Markets always move on. Once investors see signs of recovery or clarity in policy direction, confidence returns.”
In a circular issued Friday, the Central Bank of Nigeria (CBN) directed all banks currently under regulatory forbearance, whether due to credit exposures or breaches of Single Obligor Limits, to suspend dividend payments, defer executive bonuses, and halt any new offshore investments.
The market reacted.
Although the index clawed back some ground from pre-market losses that exceeded 7%, it still closed the day down by 3.98%.
By Tuesday, June 17, the wave of sell-offs had begun to ease.
By Wednesday, market sentiment turned bullish.
By Wednesday, market sentiment turned bullish.
Banking stocks bounced back on Wednesday, July 18, with the sector gaining 3.25% as investor sentiment turned positive after days of uncertainty.
Earlier in the week, the market had struggled, as concerns over the CBN’s policy shift triggered a wave of sell-offs.
Confidence returned midweek following reassuring press statements from major banks, which outlined proactive measures to address investor concerns.
This renewed optimism also lifted the broader market, with the Nigerian All-Share Index jumping 1.63%, a gain of 1,876 points, breaking through the 116,000 barrier for the first time.