Mixed Reactions Trail CBN’s Directive Suspending Banks’ Dividends, Bonuses, Investments

Some say policy strengthens financial discipline; others warn it may undermine bank stocks and shareholder confidence

The Central Bank of Nigeria’s (CBN) recent directive requiring banks under regulatory forbearance to suspend payments of dividends, bonuses to their boards and senior executives, and new offshore subsidiary investments is generating mixed reactions among financial analysts and stakeholders.

In a circular dated June 13, 2025, and signed by Dr. Olubukola Akinwunmi, CBN’s Director of Banking Supervision, the apex bank explained that the policy forms a key part of its strategy to enable banks strengthen their financial resilience, improve their capital buffers, and make full provisions for non-performing loans (NPLs).

The CBN stressed that these measures are temporary and will be lifted once banks exit forbearance and independent verification confirms their financial stability.

Some financial analysts view the policy as a decisive and forward-thinking move to accelerate the clean-up of NPLs and foster financial discipline. Others, however, warn it could undermine investor confidence and put pressure on bank stocks due to growing uncertainty.

Some stakeholders raised concerns that the policy might weigh down bank stocks, noting its lack of specificity about which banks are affected.

While initial worries circulated about a potential downturn in bank stocks, financial analysts say the policy is meant to enable banks clear their books and pay future dividends from profits backed by strong financial fundamentals.

“This move focuses on strengthening banks’ capital positions and their ability to account for their non-performing loans. All banks that wish to pay future dividends must first make sure their NPLs are adequately provided for. This will ultimately improve their financial stability and enable them to pay sustainable profits in the future.”

Expert further noted that retaining profits instead of disbursing them or sending them abroad will aid banks’ recapitalization and aid financial stability in the long term — a policy that signals strong oversight and a path toward greater confidence.

Ayokunle Olubunmi, Head of Financial Institutions Ratings at Agusto & Co, said many banks were surprised by the policy’s announcement.

“Some banks had already made significant progress in addressing their NPLs, expecting to pay their usual mid-year dividends. This policy might delay those payments. Furthermore, subsidiaries’ investment plans — many of which were meant to aid expansion — may be put on hold.”

He explained that many subsidiaries’ investment plans were not slated for 2025 anyway, adding, “the policy’s medium-term impact should be limited, while delivering greater financial stability in the long term.”

Proshare’s analysts also weighed in, stating that while the policy’s intent is “noble”, a mass sell-off by nervous investors could undermine bank stocks, regardless of their financial performance.

“This shows how policy signals can affect market sentiment, even when fundamentals remain strong. CBN’s policy will hopefully enable a return to more prudent banking practices and foster financial stability in the long run.”

A CBN insider explained: “It was a deliberate policy in its delivery and communication — the deadline for forbearances to expire is June 30, 2025, and banks have been aware for nearly a year. This policy signals there’s no turning back from compliance and lets stakeholders know the CBN is serious. The aim was to minimize market shock while strengthening the financial system.”