Nigerian banks to continue operating under leniency past 2025, according to Fitch's announcement

The Central Bank of Nigeria (CBN) has announced that some Nigerian banks will continue to operate under forbearance beyond December 2025. This decision comes as a result of these banks breaching credit exposure limits and Single Obligor Limits (SOL) as per the CBN's directive.

The banks in question will be subject to penalties, including a prohibition on dividend payments and restrictions on bonuses and foreign investments. This move is part of a series of increasingly tight controls by the apex bank aimed at reining in excessive risk-taking and capital mismanagement by banks.

Fitch Ratings predicts that these banks will continue to operate under forbearance beyond December 2025. The reclassification of loans is expected to result in increased loan impairment charges and pressure on total capital adequacy ratios. However, most institutions are expected to fulfill these commitments without requiring refinancing.

Despite these challenges, most Nigerian banks are well-positioned to absorb these shocks. This is due to proactive restructuring of Stage 2 loans, recent capital raisings, and improved net interest margins. The naira's devaluation has also had a positive impact on foreign-currency liquidity, increasing turnover in the FX market.

The CBN's recapitalization drive has led to a wave of equity injections and strategic mergers, bolstering banks' readiness for post-forbearance operations. Last month, the CBN confirmed that eight Nigerian banks have met the minimum regulatory requirements under the current forbearance regime.

The expiration of forbearance is expected to trigger the reclassification of several large Stage 2 loans as impaired. The CBN's directive aims to compel banks to recognize and address loan risks now. This was disclosed by CBN Governor Yemi Cardoso during the Monetary Policy Committee (MPC) briefing held on July 22, 2025.

The move indicates the need for capital preservation, especially in light of FX volatility, inflation, and exposure to risky sectors. The CBN appears to be signaling a shift from relief to discipline, reinforcing financial stability with measures to ensure banks enter 2026 with stronger capital buffers and cleaner balance sheets.

Fitch Ratings has noted that Nigerian banks are well-equipped to meet their Eurobond obligations, with USD2.2 billion in bonds maturing or callable by end-2026. This suggests that despite the challenges, the Nigerian banking sector remains resilient and capable of navigating through the forbearance period and beyond.

Nigerian banks to continue operating under leniency past 2025, according to Fitch's announcement