CBN Poised For Dividend As Lenders Wind Down Forbearance

When the Central Bank of Nigeria (CBN) introduced regulatory forbearance during the turbulence of COVID-19, it was a lifeline that allowed lenders to remain solvent and keep credit flowing. But as the country savours robust post-pandemic financial landscape, the CBN is pulling back the safety net, with profound implications for Nigeria’s large and medium cap banks, their shareholders, and the broader equities market.. .. Read ..Full.. Article.. .

At the center of this transition is the question of dividends—the currency of investor confidence in the Nigerian market. Six of the country’s leading lenders—Zenith Bank, FirstHoldCo (First Bank’s holding company), Access Holdings, United Bank for Africa (UBA), Guaranty Trust Holding Company (GTCO), and Stanbic IBTC—are now positioned in varying degrees to return to robust dividend payouts in 2025, after exiting CBN’s forbearance restrictions.

For investors long accustomed to banking stocks as reliable dividend machines, this shift could mark the beginning of a new cycle of capital appreciation and sector-wide momentum.

The End of Forbearance

Forbearance, by design, was never meant to be permanent. During crises, it allows banks greater flexibility in how they classify and provision for non-performing loans, providing breathing room to navigate economic shocks. In Nigeria, the policy was activated during the COVID-19 crisis, when oil price volatility, inflationary pressures, and foreign-exchange shortages threatened to destabilize balance sheets. But in mid-June 2025, the CBN drew a line in the sand.

In a circular issued to lenders, it ordered all banks still under forbearance to suspend dividend payments, defer executive bonuses, and halt investments in foreign subsidiaries. The message was unambiguous: the era of special accommodation was over. “Dividend sentiment drives the market here,” noted Samuel Oyekanmi, Research and Insight Lead at Norrenberger Financial Group.

“Once banks announce they’re off that list, it will likely steady the sector. For a short-term burst that could push the index past the 1,600-resistance zone, news of banks exiting CBN’s exposure is key.” This policy shift has created a clear distinction in the market.

Banks that have successfully cleaned up their books—GTCO and Stanbic IBTC, for instance—are now poised to reward investors more generously. By contrast, those still under CBN scrutiny face a longer road, with dividend resumption unlikely before 2028 unless earnings from non-banking subsidiaries are strong enough to support payouts.

Dividend Prospects and Market Psychology

In Nigeria’s equities market, dividends play a larger role than in many other emerging economies. They are not merely distributions of profit but signals of financial health and management confidence. Investors view consistent dividends as assurance that banks are stable, liquid, and able to weather macroeconomic storms. The suspension of dividends under forbearance dampened this sentiment.

Yet, as Oyekanmi pointed out, the prospect of reinstatement is likely to drive a rally, saying: “Dividend payments are not just about cash returns; they’re about confidence. When you see the big banks declaring, it signals that the sector is strong again.”

The NGX Banking Index, which tracks the performance of listed banks, underscores this dynamic. It opened 2025 at 1,084.5 points and surged more than 48 per cent to above 1,610 by July, lifted by optimism about earnings and expectations of regulatory clarity. But in August, the index shed 5%, dipping below 1,500, weighed down by caution over the CBN’s circular and uncertainty around second-quarter results.

For analysts, the release of halfyear earnings by the so-called FUGAZ banks (FirstHoldCo, UBA, GTCO, Access Holdings, and Zenith) is the next critical inflection point. Strong results, accompanied by dividend declarations, could not only lift the banking index back above 1,600 but also provide momentum for the broader All-Share Index, which ended August barely in the green at +0.31 per cent.

The FUGAZ Factor

The dominance of the FUGAZ banks in Nigeria’s financial landscape cannot be overstated. These five, together with Stanbic IBTC, form the nucleus of the NGX Banking Index and account for a disproportionate share of liquidity, capitalization, and investor attention.

Their corporate actions set the tone for the market, often dictating sentiment across sectors. Zenith Bank remains one of the most consistent dividend payers historically. With its large balance sheet and aggressive digital banking strategy, Zenith’s exit from forbearance is highly anticipated.

Renaissance Capital estimates Zenith among the top three banks with high exposure, but analysts believe its robust earnings power positions it to return to payouts once cleared. In the wake of the CBN announcement of the wind down on forbearance with attendant dividend restriction, Zenith, GTCO, and Access issues statements promising to exit the forbearance list and pay dividends. FirstHoldCo has been slower to release its Q2 results compared to

Forbearance, by design, was never meant to be permanent. During crises, it allows banks greater flexibility in how they classify and provision for nonperforming loans, providing breathing room to navigate economic shocks

peers, but as the oldest and most widely held banking franchise, its performance carries symbolic weight. Investors are watching to see whether its legacy challenges with asset quality have been decisively addressed. Access Holdings—Nigeria’s largest bank by assets—has been in expansion mode, with acquisitions across Africa.

While this strategy raised exposure during forbearance, its scale also provides a platform for strong recovery once restrictions lift. United Bank for Africa (UBA), with its pan-African footprint, has historically balanced strong domestic earnings with diversification.

Dividend resumption here would send a continental signal, given its broad investor base. GTCO, which avoided forbearance altogether, has already distinguished itself. Having diversified into payments and asset management, it is in pole position to increase payouts in 2025, potentially setting a benchmark for peers.

Stanbic IBTC, similarly unburdened by CBN’s restrictions, has demonstrated resilience through its wealth management and investment banking arms. Analysts expect it to continue steady payouts, reinforcing investor trust. Together, these six institutions form the fulcrum on which market sentiment turns. Their ability to restore or expand dividends could catalyze a broader re-rating of Nigerian equities.

Analysts’ Scenarios

Market watchers are sketching out three broad scenarios as 2025 unfolds. Oghentega Idogun, an analyst at MetaMacro, argues that much hinges on second-quarter results: “Bank performance is always a key driver. If results come in stronger than expected, FUGAZ stocks will rally, lifting the broader market. If they’re merely in line, we’ll see softer, modest moves. But if they disappoint, we could see a brief selloff.”

He added: “A break above 1,600 is possible if performance comes in right.” CardinalStone analysts share a similar outlook, albeit with a more nuanced caveat: “We expect a mix of good earnings and interim dividends to drive the sector forward, provided results meet expectations.” The consensus is clear: the road to renewed momentum lies in the twin drivers of earnings strength and dividend clarity.

Broader Market Implications

The equities market in Nigeria is acutely sensitive to banking stocks, given their liquidity and dominance. A strong rally in the NGX Banking Index can easily lift the All-Share Index, bringing in fresh retail participation and foreign interest. Conversely, weakness in banking names can weigh heavily on the entire market. In this sense, dividend resumption in 2025 could have effects far beyond the sector.

For pension funds, insurance companies, and retail investors, banking dividends provide predictable cash flow that supports portfolio stability. For foreign investors, they represent a tangible return in a market often clouded by currency volatility and liquidity concerns. A decisive move by the leading six banks to restore or expand dividends could therefore act as a signal that Nigeria’s financial sector is stabilizing after years of macroeconomic uncertainty.

The Road Ahead

While optimism is mounting, challenges remain. Nigeria’s macroeconomic backdrop continues to feature high inflation, volatile foreign exchange, and fragile GDP growth. The CBN’s tighter regulatory posture may also test banks’ capital adequacy ratios, especially as they ramp up provisioning without forbearance. Yet, the resilience of the banking sector is evident.

Even under forbearance constraints, most tier-one lenders reported profits and maintained strong capital buffers. Their ability to navigate crisis conditions has only reinforced investor perception of their centrality to Nigeria’s financial system. Looking ahead, the second half of 2025 is shaping up as a proving ground. Strong half-year results could set the stage for dividend declarations that, in turn, spark renewed investor appetite.

A rally past the 1,600 resistance level on the banking index would be more than a technical milestone—it would mark the reawakening of dividend-driven confidence in the market.

Conclusion

As the dust settles on the CBN’s forbearance regime, Nigeria’s largest banks are preparing for a new chapter. The six leading lenders— Zenith, FirstHoldCo, Access, UBA, GTCO, and Stanbic—carry both the burden of expectation and the opportunity to reignite market confidence through dividends.

If they deliver, 2025 could mark not just the end of regulatory relief but the beginning of a dividend-led robust Nigerian equities. For investors, the message would be clear: the banks are back in business, and with them, the market’s heartbeat. For now, all eyes are on the halfyear results, and..  Read . .More