Nigeria’s banking sector is facing its most significant stability test in over a decade as the Central Bank of Nigeria (CBN), under Governor Olayemi Cardoso, enforces a “no-mercy” policy on bad loans. The move has led to a historic “balance sheet reset,” with three major banking giants—UBA, Access Holdings, and FCMB—failing to declare dividends for the 2025 financial year.
At the center of the storm is Nestoil Limited, an indigenous oil giant, whose estimated ₦2.9 trillion indebtedness has triggered massive impairment charges across the industry.
The “Big Bang” Provisioning
Governor Cardoso has prohibited banks from distributing profits to shareholders until they fully provision for non-performing loans (NPLs), pushing back against years of regulatory “forbearance.” This shift aims to prevent a systemic collapse by forcing transparency.
Nestoil: The ₦21 Trillion Oil Exposure
The crisis stems from syndicated loans facilitated when oil production expectations were higher. With Nestoil unable to meet these obligations, lenders have moved from negotiation to aggressive recovery.
- Legal Warfare: In October 2025, banks secured a Mareva injunction to freeze Nestoil’s assets across 20 institutions.
- Asset Seizure: Lenders are currently in a legal battle to seize real estate, movable assets, and oil cargoes to recover capital.
- The “NPL” Threshold: The CBN has signaled that dividends will remain suspended until sector-wide NPLs—currently nearing 7%—fall below the 5% regulatory cap.
Strategic Outlook: A Necessary Pain?
While the lack of dividends is a heavy blow to investors, financial analysts argue that the timing is strategic. The 2025-2026 banking recapitalization exercise has provided a buffer, allowing banks that recently raised fresh capital to absorb these multi-billion naira write-offs without collapsing.
The Bottom Line: The CBN is prioritizing capital retention over shareholder payouts. By forcing banks to “take the hit” now, the regulator is attempting to flush out hidden risks in the ₦21 trillion oil and gas loan book, ensuring the industry remains solvent even if the legal battles with oil majors turn into a marathon.
Quick Summary for Shareholders:
- If you hold UBA, Access, or FCMB: Expect zero dividend payments for the 2025 FY.
- The Goal: To ensure your bank doesn’t face a 2009-style liquidity crisis.
- Watch For: The progress of Nestoil asset liquidations and the CBN’s next update on the 5% NPL target.
Credit: TheCable
Discover more from Ayobami Blog
Subscribe to get the latest posts sent to your email.
