Concerns over banking sector stability have deepened after three commercial banks failed to declare dividends for the 2025 financial year, with regulators and analysts linking the decision to heavy loan losses tied to indigenous oil firm Nestoil Limited.
Industry data shows Nestoil accounts for roughly ₦2.9 trillion of non-performing loans across several lenders, triggering what regulators call a “balance sheet reset” in the sector.
Dividend Freeze Hits Tier-One Lenders
United Bank for Africa and Access Bank are among the institutions that suspended dividend payouts. UBA’s 2025 audited results reported loan loss provisions of ₦331 billion, while profit before tax fell 47% to ₦423.4 billion from ₦803.7 billion in 2024.
Access Holdings saw impairment charges on loans and advances to customers surge 209% to ₦287.3 billion, leading total comprehensive income to drop 58%. The group also skipped its 2025 dividend.
Other banks with significant exposure to Nestoil include First Bank of Nigeria, FCMB, Union Bank, Ecobank, and Afrexim Bank. Nigerian banks’ total exposure to the oil and gas sector stood at ₦21 trillion at the end of 2024.
CBN Enforces Stricter Provisioning
Under Central Bank Governor Olayemi Cardoso, the CBN has barred affected banks from paying 2025 dividends until they fully provision for the non-performing loans. The move ends previous forbearance practices and aims to reflect true asset quality.
Five tier-one and tier-two lenders — Access, UBA, Ecobank, First HoldCo, and FCMB — booked a combined ₦2.16 trillion in impairment charges in 2025, directly reducing net income and shareholder payouts.
Breakdown of Bank Provisions
- FCMB Group: Net impairment losses on loans doubled to ₦92.5 billion from ₦43.7 billion a year earlier. The loan book contracted slightly as the bank took a defensive stance. No 2025 dividend was announced.
- First HoldCo Plc: The parent of First Bank took a ₦748 billion impairment charge, citing CBN directives to end forbearance on bad loans. The bank is unlikely to pay a 2025 dividend.
- UBA: Recorded ₦331 billion in loan loss provisions and confirmed no dividend for 2025.
- Ecobank Group: Posted net impairment losses of ₦707.52 billion on loans, which auditors flagged as a key audit matter.
- Access Holdings: Impairments more than doubled to ₦287.3 billion, prompting the dividend suspension.
Legal Action to Recover Debts
Lenders secured a Mareva injunction in October 2025, freezing Nestoil’s assets across more than 20 financial institutions. The order covers bank funds, real estate, and oil cargoes. Banks have also moved to appoint receivers and seize assets, despite legal challenges from Nestoil. Analysts warn that prolonged litigation could lock up capital and strain sector liquidity.
Systemic Risks and Regulatory Shift
The CBN now prioritizes capital retention, requiring banks to suspend dividends until non-performing loans fall below 5%. Banking sector NPLs approached 7% in 2025, raising concerns about stability if oil-sector defaults persist.
Experts say the defaults stem from syndicated loans issued during periods of high oil production forecasts. Nestoil’s repayment troubles have hit lenders with large exposure to independent oil and gas firms.
Analyst View: Painful but Necessary
Financial analysts argue that Cardoso’s approach, described as a “Big Bang” provisioning policy, is intended to avoid a repeat of the 2009 banking crisis. By forcing immediate write-downs, the CBN wants the ₦21 trillion oil sector exposure accurately reflected on bank books.
The stress comes as banks complete a recapitalization exercise. Institutions that recently raised fresh capital are better positioned to absorb the write-offs.
Outlook
The dividend freeze marks a sharp shift from previous regulatory forbearance. While shareholders face short-term pain, the CBN says the goal is to restore confidence and ensure banks can withstand commodity-linked shocks. Recovery for exposed lenders will depend on asset sales, legal outcomes, and oil sector performance.
