Some Nigerian Banks Expected to Remain Under Forbearance Beyond 2025, Reports Fitch Ratings
Fitch Ratings has projected that while most Nigerian banks are likely to exit regulatory forbearance by the end of 2025, a select group of institutions may continue to operate under these regulatory accommodations into 2026.
Banks extending beyond the forbearance period would face strict restrictions, including limitations on dividend payments, executive bonuses, and foreign investments.
This development is part of the Central Bank of Nigeria’s (CBN) strategy to strengthen financial stability and ensure that banks enter 2026 with more resilient capital structures and cleaner balance sheets.
Analysts say this approach is intended to improve transparency, mitigate systemic risk, and encourage banks to address potential loan defaults proactively.
Banks remaining under forbearance will be subject to regulatory penalties designed to incentivize swift correction of asset quality issues.
Fitch highlighted that institutions failing to meet capital or risk-adjusted thresholds could see constraints on capital distribution to shareholders, as well as tighter limits on international operations.
The CBN’s directive is particularly focused on banks with breaches in credit exposure limits and Single Obligor Limits (SOL), which regulate the maximum lending to individual borrowers relative to a bank’s net worth. Observers believe this regulatory tightening will compel banks to recognize and address non-performing assets sooner rather than defer potential losses.
The conclusion of forbearance will likely result in the reclassification of numerous Stage 2 loans as impaired, triggering higher loan impairment charges and increased pressure on capital adequacy ratios.
However, Fitch emphasized that most Nigerian banks are relatively well-positioned to withstand these shocks, thanks to proactive restructuring of problem loans, recent capital injections, and improved net interest margins that have strengthened loss-absorption capacity.
The recent recapitalization push, spurred by CBN’s revised minimum paid-in capital requirements, has prompted equity injections, strategic mergers, and acquisitions, further reinforcing banks’ financial stability as they transition out of regulatory forbearance.
Despite macroeconomic challenges, the naira’s devaluation has had a stabilizing effect on foreign currency liquidity, boosting turnover in the FX market. Fitch also reported that Nigerian banks are well-prepared to meet their Eurobond obligations, with approximately USD 2.2 billion in bonds maturing or callable by the end of 2026.
Most banks are expected to honor these obligations without requiring refinancing.
This outlook underscores the CBN’s ongoing commitment to fortifying Nigeria’s banking sector against potential shocks and improving the overall resilience of financial institutions. Analysts believe that the gradual exit from regulatory forbearance will result in a more transparent and robust banking landscape, better aligned with global banking standards and investor expectations.
