Experts Support CBN’s Dividend Freeze to Strengthen Bank Capital

Financial analysts and economists have backed the Central Bank of Nigeria (CBN)’s recent directive for banks under regulatory forbearance to suspend dividend payments, executive bonuses, and new investments in foreign ventures, saying the move will help shore up capital and maintain financial system stability.

In a circular issued on June 13, the apex bank stated that the policy affects banks with ongoing exposure to credit risk, or those that have breached their Single Obligor Limits (SOL). Affected institutions are now required to improve their capital adequacy before making any new distributions to shareholders or investing abroad.

Analysts argue that this measure is crucial in the current economic climate, as banks face rising loan impairments, currency devaluation pressures, and increased provisioning. The suspension of dividends is expected to preserve internal funds for recapitalization and mitigate the risk of financial instability.

Despite general support, there have been concerns from investors and market watchers about the potential negative impact on shareholder confidence and stock performance. Others questioned whether the Securities and Exchange Commission (SEC) was adequately consulted before the announcement.

Nonetheless, experts maintain that the directive reflects a necessary shift toward long-term financial discipline and improved risk management in the banking sector.