…the Nigerian market blinks week after
A week after the Central Bank of Nigeria (CBN) issued a Circular to banks on the resolution of regulatory forbearance on their single obligor limit (SOL) infractions and other loan assets while it suspended bank payments of dividends, bonuses, and foreign expansion, the stock market took an early tumble before a speedy market reversal. The initial fallout of the CBN circular was a temporary slump in bank share prices which tore analysts’ expectations to shred as capital market operators (CMOs) with a ‘buy’ bias were wrong-footed. Those on the ‘sell side’ had broad grins on their faces but only for a brief two days as the prices of the affected banks quickly recovered by Tuesday, June 17, 2025, as banks made statements concerning the resolution of their forbearance issues with the CBN by the end of June 2025 (see illustration 1 below).
In an earlier report after the CBN Circular was released on Friday, June 13, 2025, Proshare expressed concerns over the market implications of the Circular. The report observed that the suspension of the payment of dividends on bank equity at a time of banking sector recapitalization could send the wrong signals to present and prospective investors.
It was, therefore, not surprising that by Monday, June 16, 2025, the market took a noticeable hit as the banking Sector Index (BSI) slid by 3.98%, Nevertheless, the market’s overall year-to-date (YTD) return remained one of the global market’s highest at 12.15% ahead of an emerging market like Argentina. Indeed, banks like Access Bank, Zenith Bank, UBA, GTCO, First Holdco, FCMB, and Fidelity Bank saw price cuts. According to a senior C-suite bank executive who requested anonymity ‘the CBN’s weekend Circular jolted the banks, not necessarily because of the call for a resolution of forbearance on bank credits, but because the banks knew that the restrictions on dividend payouts would scare investors, it was like a punch to the recapitalization gut’
Read: CBN’s Temporary Suspension of Bank Dividends and Bonus Circular – Matters Arising
The June 13, 2025, CBN Circular
To make matters worse, a report by Messrs. Renaissance Capital (Rencap) for June 2025 laid bare the list of commercial bank lenders with a CBN forbearance challenge and by how much they were in the hole. This spooked the market further and large sell orders were ignited as investors dashed for the door by offloading their bank equity holdings on Monday and Tuesday, this was just before FCMB in a detailed Press Release explained its forbearance situation and assured that the matter would be resolved before the end of June 2025. The FCMB release encouraged other banks to issue similar press statements to calm investors’ concerns. Each of the releases assured investors that banks’ 2025 dividend payments would be unaffected by the CBN Circular.
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