CBN Tightens Grip on Banks as Analysts Warn of Dividends Drought

The Central Bank of Nigeria's suspension of dividends and bonuses for banks under forbearance marks a shift to stricter oversight. In this analysis, MARY AFOLABI examines how the policy aims to restore prudence, strengthen capital buffers, and the growing concerns it raises over liquidity, recapitalisation, and investor confidence.

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In a decisive move that has sent shockwaves through Nigeria's financial sector, the Central Bank of Nigeria (CBN) issued a circular on June 13, 2025, directing all deposit money banks under forbearance to suspend dividend payments to shareholders and bonus payments to directors.

This directive, which aims to strengthen financial system stability, marks a significant departure from years of regulatory leniency and underscores the apex bank's renewed focus on banking prudence.

The policy shift, though controversial, is widely seen by analysts as an attempt to restore discipline within the banking sector and to redirect focus from aggressive profit declarations to genuine balance sheet repair. A recent report by Proshare published on June 15, 2025, described the CBN's intentions as noble and consistent with a broader return to prudent banking practices. According to the report, the real lesson lies in the urgent need to mitigate the economic and financial pain that could arise from unchecked lending and poor governance structures.

Notably, Renaissance Capital (Rencap), in its latest outlook on Nigerian banks, described the CBN's move as both timely and necessary. Six months after predicting the end of regulatory forbearance, Rencap noted that the apex bank's directive to suspend dividends, bonuses, and foreign investments aligned with its expectations. The institution argued that such measures would address not only asset quality concerns but also looming liquidity issues, making cash profits a more accurate reflection of bank health than accounting profits.

Rencap went further to commend the CBN's orthodox policy stance and expressed hope that this new era of strict regulatory enforcement would redefine expectations in the financial markets. In recent years, Nigerian markets have come to expect policy reversals and inconsistent enforcement timelines, thereby weakening regulatory authority. The consistency displayed by the CBN in this