A newly released report by Renaissance Capital has highlighted growing concerns over the financial health of several major Nigerian banks, citing their exposure to regulatory forbearance loans and the implications of recent directives from the Central Bank of Nigeria (CBN).
The report, titled “Nigerian Banks, Cash is King,” forecasts that top-tier institutions such as Access Bank, FirstBank, and Zenith Bank may be forced to suspend dividend payments for several years in order to comply with tightened regulatory guidelines. These measures are part of efforts by the CBN to reinforce capital adequacy and reduce risks associated with impaired loan portfolios.
The move follows a directive issued by the CBN on June 13, instructing banks with unresolved forbearance exposures to suspend dividend payments, executive bonuses, and all new investments in offshore subsidiaries.
“Following the CBN’s directive, we expect the banking arms of ACCESSCORP, FIRSTHOLDCO, and ZENITHBANK to pause dividend payments until they have fully provided for their forbearance exposure and single obligor limit exposures. Specifically, we anticipate that the banking arms of ACCESSCORP, FIRSTHOLDCO and ZENITHBANK to potentially resume dividend payments in 2028. As such, we expect dividend payments henceforth to come from the non-banking subsidiaries of the above-mentioned Groups,” the report stated.
According to the CBN, these interventions aim to bolster capital buffers and ensure banks have sufficiently provisioned for high-risk loans, particularly those in breach of the regulatory Single Obligor Limit (SOL). Until these conditions are met, dividend restrictions are expected to remain in place.
Renaissance Capital analysts expect both interim and final dividend distributions to be paused indefinitely for the most affected institutions. A prior assessment by the firm suggested that nearly all Nigerian banks had some level of forbearance-related exposure, though the latest report updates those findings with more recent insights.
Top Banks With Highest Exposure
Renaissance Capital identified Zenith Bank, FirstBank, and Access Bank as having the largest exposure to loans under regulatory forbearance:
- “Zenith Bank carries forbearance loans equivalent to 23% of its gross loan book, FirstBank has an exposure of 14%, and Access Bank stands at 4%,” the report notes.
- Tier-II banks have also been impacted, with Fidelity Bank and FCMB showing exposures of 10% and 8% respectively.
- In contrast, “GTCO and Stanbic IBTC have zero exposure to forbearance loans, having already cleaned up their books.” GTCO had proactively written off and provisioned for these loans by December 2024.
The estimates for GTCO, UBA, Fidelity, and FCMB were based on recent management interactions, while those for Zenith Bank reflect data from late 2024.
Absolute Exposure Figures
In dollar terms, the exposure remains substantial:
- Zenith Bank’s forbearance exposure is estimated at $1.6 billion, followed by FirstBank at $887 million and Access Bank at $304 million.
- Fidelity Bank and FCMB carry exposures of $296 million and $134 million, respectively.
- UBA’s exposure stands at approximately $282 million, according to the report.
FCMB’s Response and Outlook
FCMB Group Plc moved to reassure stakeholders, stating that it has significantly reduced its forbearance exposure—from ₦538.8 billion in September 2024 to ₦207.6 billion as of May 31, 2025.
The bank anticipates a short-term rise in Stage 3 non-performing loans, peaking at around 11.5% before tapering below 10% by year-end, supported by projected loan growth.
It also confirmed that it still plans to issue dividends from its non-banking subsidiaries.
Status of Other Banks
While official statements from other affected banks are still pending, internal sources at Zenith Bank indicate the institution plans to exit its forbearance exposure by the end of the year. They added that Zenith’s current profitability is sufficient to cover the impaired loans.
SOL Breaches a Growing Concern
Renaissance Capital’s report further warned of potential breaches of the Central Bank’s Single Obligor Limit:
- FirstBank, Fidelity Bank, and Zenith Bank are among those at risk, with loans heavily concentrated in Nigeria’s oil and gas sector—particularly upstream projects and refinery ventures.
- FCMB, however, remains compliant, with its largest single forbearance exposure at $68.1 million, well below its regulatory ceiling of $94 million.
The Importance of Cash Profits
Given the distortion caused by current IFRS rules, which allow banks to recognize interest income from at-risk loans (Stage 2) even in the absence of cash inflows, Renaissance Capital emphasized that cash profits are now a more accurate indicator of financial performance. This is critical for determining a bank’s real capacity to pay dividends, absorb losses, or fulfill obligations.
No Banking Dividends Until 2028
As the CBN directive takes full effect, dividend payments from the banking operations of Access Bank, FirstBank, and Zenith Bank are unlikely to resume until 2028.
- While dividends may still be distributed from non-banking subsidiaries, these units contribute relatively minor portions to overall group earnings.
- UBA is expected to resume dividend payments earlier—by 2026—due to its limited exposure and strong cash position.
- GTCO remains in the most favorable position, having already provisioned for past exposures and unlikely to suspend dividend payments.
FirstHoldCo’s Position
In response to the report, sources at FirstHoldCo (FirstBank’s parent company) highlighted its solid shareholder support, favorable valuation for long-term investors, and sustained income growth. They also noted potential upside from any regulatory review of the current Cash Reserve Ratio (CRR) policy, positioning the group for long-term recovery.
