A new research note by Renaissance Capital has revealed that several of Nigeria’s most prominent banks are facing significant exposure to regulatory forbearance loans.
The report titled “Nigerian Banks, Cash is King” suggests some are now likely to suspend dividend payments for multiple years as they work to meet stricter prudential standards imposed by the Central Bank of Nigeria (CBN).
The notice follows a June 13 directive from the CBN, instructing banks with unresolved forbearance exposures to halt dividend payments, defer executive bonuses, and suspend all new investments in offshore subsidiaries.
The aim, the CBN said, is to strengthen capital buffers and ensure adequate provisioning against impaired loans, especially those that risk breaching the regulatory Single Obligor Limit (SOL).
The suspension is expected to remain in place until affected banks have fully provisioned for their forbearance exposures and phased them out entirely.
For several banks under coverage, analysts at Renaissance Capital expect both interim and final dividends to be paused indefinitely.
An earlier report by Renaissance Capital, published by Naijaonpoint, indicated that nearly all Nigerian banks had some level of exposure to forbearance-related loans and could face restrictions on dividend payments.
However, the analysis was based on data from the first half of 2024 and may not account for the significant progress some banks have made since then in addressing these exposures, hence the need for the latest update.
According to Renaissance Capital’s estimates, Zenith Bank, FirstBank, and Access Bank rank highest in terms of forbearance exposure.
According to the report, estimates for GTCO, UBA, Fidelity, and FCMB were based on recent management engagements, while the estimate for Zenith Bank was drawn from a December 2024 interaction.
In absolute terms, exposures remain significant. Renaissance Capital estimates Zenith Bank’s total forbearance exposure at $1.6 billion, followed by FirstBank at $887 million and Access Bank at $304 million.
The report presented the figures in United States Dollars.
Other notable exposures include Fidelity Bank at $296 million, UBA at $282 million, and FCMB at $134 million. Rencap stated their figures in United States Dollars.
Other banks are yet to release statements. However, sources in Zenith Bank indicate there are plans to exit forbearance loans by the end of the year, stating that the bank’s profit is significant enough to cover for the forbearance loans.
Beyond the scale of these exposures, the Rencap also flags concerns over potential regulatory breaches.
The report also stated that cash profits are now a more meaningful indicator of bank performance than reported earnings, given the distortions caused by Nigeria’s financial reporting standards.
The report also stated that cash profits are now a more meaningful indicator of bank performance than reported earnings, given the distortions caused by Nigeria’s financial reporting standards.
Under current IFRS rules, banks can recognize interest income on restructured or at-risk loans (classified as Stage 2) even when no cash is received, leading to a disconnect between what is reported and the actual liquidity available to fund dividends, repay obligations, or absorb losses.
Following the CBN’s directive, Access Bank, FirstBank, and Zenith Bank are expected to suspend dividend payments from their banking arms until at least 2028, pending full provisioning for their forbearance and single obligor exposures.
Download the report – Renaissance Capital Africa Research – Nigerian Banks – Cash is king