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Economic analysts have stated that the Central Bank of Nigeria’s decision to temporarily suspend banks with forbearance loans from dividend payments and investment in foreign subsidiaries would enable these banks to operate on a stronger capital base and attract genuine capital.
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In a circular, the CBN directed banks operating under regulatory forbearance to suspend dividend payments, defer bonuses for executives, and halt investments in foreign subsidiaries or offshore ventures until the regulatory forbearance is fully exited and the banks’ capital adequacy and provisioning levels are independently verified.
Financial experts believe this move aims to keep the ongoing recapitalization exercise on track and ensure actual injection of fresh capital into banks. Managing Director of Arthur Steven Asset Management Limited, Tunde Amolegbe, said, “I think it’s a move aimed in part at keeping the recapitalisation exercise on track to achieve its primary objective, which is to ensure actual injection of fresh capital into banks.”
Amolegbe noted that banks relying on CBN borrowing to operate and declaring profits as dividends engage in “financial engineering at best or round-tripping at worst.” He added that shareholders of affected banks will need to inject actual capital to strengthen the banks.
Other experts, including Head of Financial Institutions Ratings at Agusto & Co., Ayokunle Olubunmi, and CEO of CFG Advisory, Adetilewa Adebajo, shared similar views. Olubunmi warned that some banks may struggle to pay interim dividends, while Adebajo said the move is designed to strengthen banks’ financial positions until they meet regulatory standards.
Adebajo emphasized that banks must make full provisions for Non-Performing Loans, impacting their profitability, and that fresh capital should be used to improve the quality of their risk asset portfolio.
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Jonathan Nwokpor
