CBN Loan Clean-Up Strengthens Nigerian Banks Despite Dividend Hit
Nigeria’s banking sector is emerging stronger after the Central Bank of Nigeria’s directive mandating full provisioning for legacy oil and gas loans, a move analysts say has helped clear long-standing risks and improve financial stability across the industry.
The policy, aimed at cleaning up bank balance sheets, required lenders to fully account for problematic exposures before resuming dividend payments. As a result, three major banks—United Bank for Africa (UBA), Access Holdings, and First Holdco—did not declare dividends for the 2025 financial year, despite posting solid profits.
Although the decision disappointed some shareholders, financial experts say it reflects a necessary correction to strengthen the sector in the long term.
During the clean-up process, banks recorded heavy impairment charges. UBA set aside about N331 billion for loan losses, while Access Holdings increased its impairment provisions by 209 per cent to N287.3 billion, highlighting aggressive efforts to address risky exposures.
Recovery actions have also intensified, with banks pursuing court-backed measures such as asset freezes and receivership proceedings to recover outstanding debts. One of the notable cases involves restrictions placed on assets linked to Nestoil across multiple financial institutions.
Analysts say the short-term impact on profits and dividend payouts is outweighed by long-term benefits, including stronger capital buffers, improved transparency, and reduced systemic risk in the banking sector.
They note that the Central Bank’s insistence on full provisioning ensures that financial reports reflect the true health of banks, boosting investor confidence and market credibility.
Despite the temporary dividend pause, banking stocks have remained resilient on the Nigerian Exchange, with the sector recording strong gains and key lenders posting solid share price growth.
Recent earnings also show improved performance, with UBA and Access Holdings reporting stronger profits in the first quarter of 2026 compared to the previous year, suggesting recovery momentum is already underway.
Experts further highlight that the banking recapitalisation exercise has strengthened the sector’s ability to withstand shocks while positioning it for more sustainable growth and future dividend payments.
Overall, analysts agree that while investors may feel short-term pressure, the clean-up is laying the foundation for a more stable, transparent, and stronger banking system in Nigeria.
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