This is part of a strategy to reinforce financial discipline and protect the stability of the banking sector.
The directive affects only those banks that are receiving temporary regulatory relief, commonly referred to as “regulatory forbearance”, a mechanism through which the CBN provides special support to institutions signalling financial stress or failing to meet key prudential standards.
These banks, according to the apex bank, must focus squarely on stabilising their operations and restoring financial health before engaging in profit distribution or expansionary ventures.
“This temporary suspension is until such a time as the regulatory forbearance is fully exited and the banks’ capital adequacy and provisioning levels are independently verified to be fully compliant with prevailing standards.
“This supervisory measure is intended to ensure that internal resources are retained to meet existing and future obligations and to support the orderly restoration of sound prudential positions”, the apex bank stated.
The regulator explained that the restrictions specifically apply to banks currently benefiting from forbearance in relation to credit exposures and breaches of the Single Obligor Limit, conditions that signal potential distress in the affected institutions.
Until these banks are able to meet capital adequacy requirements and demonstrate full compliance, they are barred from issuing dividends to shareholders, awarding bonuses to directors and senior management, or initiating new investments in foreign subsidiaries or offshore ventures.
The move signals a shift by the CBN from temporary relief to tighter oversight and fiscal discipline.
It comes at a time when Nigeria’s banking industry is undergoing a sector-wide recapitalisation programme, with new capital thresholds set to be implemented gradually up to 2026. Against the backdrop of foreign exchange volatility, rising inflation and growing exposure to high-risk sectors, the apex bank is making it clear that capital preservation is now paramount.
This latest directive builds on a series of earlier policy moves aimed at limiting risky financial behaviour. In April 2022, the CBN extended interest rate forbearance on loans by an additional year to ease post-pandemic pressure on borrowers, though the decision also left banks more vulnerable to credit risks. By September 2023, the bank issued a circular prohibiting lenders from using gains derived from foreign exchange revaluation for dividends or capital expenditure, mandating instead that such profits be warehoused in a “Special Regulatory Reserve” until further notice.
The CBN doubled down on that position in March 2024, cautioning banks against using volatile FX windfalls to fund dividends, particularly given their temporary nature. The regulator instead advised that the funds be retained to bolster capital positions and help absorb shocks resulting from the unification of Nigeria’s multiple exchange rates.
With this latest directive, the CBN analysts note, has expanded its oversight, not just restricting how profits are used, but also regulating who can benefit from them and where they can be invested.
It reflects a deepening resolve by the CBN to prioritise institutional recovery, enforce prudential compliance, and ensure that banks under regulatory watch rebuild their financial foundations before pursuing shareholder returns or global ambitions.
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