Follow Us on Google
By Chinwendu Obienyi
As Nigeria’s banking sector races toward the end of the Central Bank of Nigeria’s (CBN) regulatory forbearance regime, a new signal from Fitch Ratings has underlined the high stakes for lenders still struggling to meet prudential requirements.
CBN forbearance is basically a temporary relief or waiver that it gives to banks (and sometimes other financial institutions) so they can have extra time or flexibility to meet certain regulatory requirements, like being allowed more time to raise their capital to meet new requirements.
While most banks are expected to exit the temporary relief measures by December 2025, the credit rating agency warns that a handful will remain under forbearance beyond the deadline but at a steep price.
The implications are clear: banks unable to meet regulatory thresholds will be forced to operate under stringent restrictions.
Fitch notes that such institutions will be prohibited from paying dividends, issuing executive bonuses, or making foreign investments. In effect, these restrictions are designed to penalize weak compliance while nudging banks toward capital discipline and greater transparency.
The CBN first introduced the forbearance framework in June 2025, targeting banks that had exceeded prudential credit exposure limits and the Single Obligor Limits (SOL), the ceiling on how much a lender can extend to a single borrower relative to its capital base.
These temporary leeways were meant to give institutions time to restructure risky loans and shore up their balance sheets amid economic turbulence.
But with the December deadline approaching, the tone has shifted from accommodation to enforcement. By compelling banks to recognize and provision for bad loans now rather than later, the CBN hopes to avert hidden risks that could threaten the sector in the future.
According to the CBN Governor, Olayemi Cardoso, eight banks have already met the minimum requirements under the forbearance regime. That leaves a handful still playing catch-up, under growing scrutiny from both regulators and rating agencies.
Specifically, GTCO had already cleared its regulatory forbearance as at December 2024. Zenith Bank confirmed it will fully exit, covering single obligor limit (SOL) exposures and other credit facilities two months ago (June 30, 2025).
FCMB on its part, has substantially reduced it’s exposures from N538.8 billion (September 2024) to N207.6 billion by the end of May 2025 and expects to exit the regime soon after it completes capital measures towards the end of the year.
“Ultimately, this move aims to strengthen financial institutions by reinforcing capital buffers and improving balance sheet resilience,” Fitch said in its latest peer credit review.
The transition will not be painless. The expiration of forbearance is expected to trigger the reclassification of several large Stage 2 loans as impaired, pushing up loan-loss provisions and exerting pressure on capital adequacy ratios. For weaker banks, this could mean a hit to profitability and the possibility of further capital raising.
Still, analysts say most lenders are better prepared than they were two years ago. A combination of proactive loan restructuring, fresh equity injections, and widening net interest margins has strengthened their loss-absorption capacity. The CBN’s recapitalization drive, anchored on revised paid-in capital requirements to be phased in through 2026, has also spurred mergers and acquisitions, creating a leaner but more resilient industry.
Specifically in July, Daily Sun had reported that banks were facing a capital shortfall of about N783.4 billion. To bridge the gap, several banks are currently engaging institutional investors, private equity and international partners while simultaneously exploring rights issue, private placements and asset restructuring.
Despite macroeconomic headwinds, including persistent inflation and high exposure to vulnerable sectors, the devaluation of the naira has provided some relief. By boosting foreign-exchange liquidity, it has increased turnover in the FX market, easing concerns over dollar shortages.
Fitch also points to banks’ improved ability to meet external debt obligations. With $2.2 billion in Eurobonds maturing or callable by end-2026, Nigerian banks are, for now, seen as well-positioned to meet these commitments without requiring refinancing, a reassuring signal to foreign investors who have often worried about rollover risks.
For Nigeria’s banking sector, the countdown to December 2025 represents more than a regulatory deadline; it is a stress test of resilience in an era of economic volatility. Institutions that have proactively raised capital, cleaned up loan books, and strengthened risk management practices will likely emerge stronger and more competitive.
Those that lag may find themselves shackled by restrictions that limit their ability to reward shareholders or expand strategically.
Either way, the tightening regime reflects the CBN’s broader ambition: to steer Nigeria’s banks toward global standards of transparency, capital adequacy, and resilience. As the recapitalization drive continues into 2026, the forbearance exit will mark the beginning of a new phase one in which discipline, not leniency, defines the rules of engagement.
