By David Akinmola
Despite aggressive reforms and a sector-wide recapitalisation drive, some banks will continue to operate under the Central Bank of Nigeria’s (CBN) regulatory forbearance regime beyond December 2025, Fitch Ratings said.
The credit rating agency stated that while most lenders are expected to exit the temporary relief framework by the deadline, a few institutions will require extended forbearance and will face stringent restrictions, including a ban on dividend payouts, executive bonuses and foreign investments.
The development comes as the CBN intensifies efforts to strengthen financial stability and ensure that banks enter 2026 with robust capital buffers and cleaner balance sheets.
Fitch noted that the forbearance regime, introduced in June, was designed to give banks temporary relief after breaches of exposure limits and single obligor limits (SOL), that is, the maximum loan amount a bank can grant to a single borrower relative to its net worth.
The regulator now appears focused on enforcing stricter compliance and compelling lenders to address loan risks rather than defer them, the agency said.
According to Fitch’s peer analysis, the expiration of forbearance will likely trigger the reclassification of several large stage two loans as impaired, leading to increased impairment charges and pressure on capital adequacy ratios.
Yet, the agency believes most Nigerian banks are well prepared to absorb potential shocks due to proactive restructuring of vulnerable loans, recent capital raises and improved net interest margins that have enhanced loss absorption capacity.
The recapitalisation push, driven by the CBN’s revised capital requirements, has already sparked a wave of equity injections, mergers and strategic partnerships across the sector.
These measures, Fitch said, position most banks for post-forbearance operations, even as they navigate challenges such as foreign exchange (FX) volatility, high inflation and exposure for risky sectors.
Fitch also highlighted foreign currency dynamics as a critical factor for the sector. It noted that naira devaluation has boosted liquidity in the FX market, increasing turnover and improving dollar availability for banks.
This has strengthened their capacity to meet external obligations, including $2.2 billion in Eurobonds maturing or callable by the end of 2026, it said.
Fitch expects most banks to meet the commitment without refinancing, underscoring their improved balance sheet resilience.
Analysts in the market believe the decision to extend forbearance for some institutions signals the CBN’s shift from regulatory leniency to strict discipline, aimed at curbing excessive risk-taking and enhancing transparency.
The banking industry is currently undergoing its most significant recapitalisation in decades, with phased capital thresholds set to run until 2026.
