The decisive return to orthodox monetary policy by the Central Bank of Nigeria (CBN) and its roll out of stringent measures aimed at strengthening banks’ capital buffers and curbing regulatory forbearance abuses are testing the financial resilience of financial institutions, like FirstHoldco, Zenith Bank, UBA, FCMB, and Access Bank, among others.
That was as a report released on Monday by Renaissance Capital, an emerging and frontier market investment bank, titled, “Nigerian Banks: Cash is King,” revealed that FirstHoldCo had significant forbearance exposure of 14 per cent, estimated at $887 million.
Reacting to the development in the banking industry, the Nigerian Exchange Limited (NGX) Banking Index on Monday opened the week on a bearish note, dropping by four per cent to 1,169.74 basis points.
The new CBN directives, which included a temporary suspension of dividend payments, deferral of management bonuses, and a halt on foreign investments, were designed to ensure full provisioning for high-risk exposures and improve cash-based profitability metrics.
The policy had already posed concerns for financial institutions, such as FirstHoldco, with significant forbearance-linked assets.
In a circular dated June 13, 2025, and signed by Director of Banking Supervision, Dr. Olubukola Akinwunmi, CBN instructed all banks currently under regulatory forbearance to suspend the payment of dividends to shareholders, bonuses to directors and senior executives, and investments in offshore subsidiaries or new foreign ventures.
The move, according to the apex bank, was part of a broader strategy to ensure that banks operating under forbearance supervision strengthened their financial resilience and fully complied with capital adequacy and loan provisioning standards.
CBN emphasised that the restrictions were temporary and will be lifted once key conditions were met, a full exit from regulatory forbearance, and independent verification of capital and provisioning levels as being within acceptable regulatory thresholds.
Some analysts believe CBN’s move was a push to strengthen credit discipline, enhance transparency, and compel banks to clean up their balance sheets ahead of the ongoing recapitalisation exercise.
The genesis was that during the COVID-19 crisis, CBN granted forbearance to the entire banking industry to enable banks withstand the challenge posed by the pandemic.
However, the industry regulator had given a deadline of December 2024 to phase out the policy. This saw some industry players putting pressure on CBN to extend it by another year, but the CBN Governor, Mr. Olayemi Cardoso, maintained that in line with his return to orthodoxy, he would not extend the deadline, which made him to give all operators six months extra, which expires this month.
Our correspondent learnt that Cardoso believed banks should not be paying dividends and bonuses to shareholders and directors while carrying forbearance.
Companies, such as Neconde, Aiteo, Oando, 9mobile, and Wempco, had benefited from years of regulatory leniency, despite accumulating non-performing loans (NPLs).
Neconde, a subsidiary of Nestoil Group, Aiteo, Oando, and others, in the oil and gas sector, had some of the highest exposures to banks; with 9mobile in the telecom sector, which had almost gone moribund, as well as Wempco in manufacturing.
Findings revealed that FirstBank had one of the highest exposures in the industry. The subsidiary of FirstHoldco had two major exposures: firstly, Aiteo, where they had two loans – a $500 million facility and another $300 million, which was a shareholder loan.
Secondly, the bank was also hit by its loan to Dangote Refineries. The Dangote loan though performing was above the Single Obligor Limit (SOL) and was allowed because of the forbearance the Dangote Group got from CBN as a result of its huge strategic national project.
For the oil and gas sector, Neconde Energy had over $3 billion, and Aiteo Energy Resources had over $2 billion.
It was, however, gathered that Oando had since restructured its loans and gone ahead to acquire AGIP, which had improved its prospects. Similarly, the oil and gas company recently announced an increase in its Reserve Based Lending (RBL2) facility to $375 million. The facility refinancing secured was led by the African Export-Import Bank (Afreximbank), with the support of Mercuria, extending the final maturity date of the facility to January 30, 2029.
This upsizing was a result of the company’s progress in deleveraging, having reduced the original $525 million RBL2 facility, signed in 2019, to $100 million by the close of 2024.
9Mobile, which was almost moribund, was a big problem.