Banking stocks rebound amid CBN forbearance policy shock

The sharp decline in Nigerian banking stocks following the Central Bank of Nigeria’s (CBN) new directive on regulatory forbearance may present a unique buying opportunity for value investors, according to Ugodre Obi-Chukwu, founder and CEO of Nairametrics.

Speaking on MoneyLine with Nancy during a segment titled “CBN Policy on Forbearance,” Obi-Chukwu said the sell-off in bank shares—triggered by the suspension of dividends, executive bonuses, and offshore investments—could be a temporary dip that offers long-term rewards for savvy investors.

“I’m a fundamental investor. I always like to buy when prices are low. With the current drop in share prices and the strong fundamentals many Nigerian banks still maintain, this could be a great opportunity,” he said.

While acknowledging the CBN’s directive may dampen near-term sentiment, Obi-Chukwu pointed to the historical resilience of Nigerian banks during periods of policy upheaval and recapitalization exercises.

“These banks survived previous recapitalization shocks that also led to share price declines, and they bounced back. I don’t think this will be any different,” he added.

He explained that many of the loans under forbearance are tied to the oil and gas sector, which is now on a recovery path due to rising global oil prices. As a result, banks may soon begin to recover those loans and exit the forbearance classification earlier than expected.

Obi-Chukwu expressed particular confidence in the FUGAZ group of banks—FirstBank, UBA, GTCO, Access, and Zenith—highlighting Zenith Bank as especially well-capitalized and likely to meet the apex bank’s new capital adequacy and governance requirements. He predicted that several of these Tier-1 lenders may exit the CBN’s forbearance list by the third quarter of 2025.

READ ALSO: Access Holdings exits CBN regulatory forbearance, affirms strong capital base

Despite the immediate impact on dividend payouts, he noted that most of these banks operate profitable subsidiaries that can upstream earnings to support shareholder returns, albeit at slightly reduced levels compared to previous years.

On the broader market outlook, Obi-Chukwu said investor sentiment would stabilize as clarity returns to policy direction.

“Markets always move on. Once investors see signs of recovery or clarity in policy direction, confidence returns,” he stated.

The market reacted swiftly to the CBN’s circular released Friday, June 13, which ordered banks under regulatory forbearance—whether due to bad loans or breaches of lending limits—to halt dividend payments, defer executive bonuses, and pause new offshore investments.

When trading resumed on Monday, June 16, the Nigerian Exchange (NGX) Banking Index plunged over 7% in pre-market movements before recovering slightly to close the session with a steep 3.98% decline.

By Tuesday, June 17, the panic appeared to be subsiding. The index slipped only 0.20%, with four of the five FUGAZ banks recording moderate losses, signaling that the wave of sell-offs was easing.

Market confidence returned in full force on Wednesday, June 18—dubbed “Green Wednesday” by traders—as banking stocks rallied by 3.25%. The bounce-back followed reassuring press releases from several major banks, which outlined their financial resilience and readiness to comply with the new regulatory environment.

The broader market also benefited from the renewed optimism. The NGX All-Share Index surged by 1.63%, or 1,876 points, breaking past the 116,000 threshold for the first time in history.

Market analysts say the quick rebound in banking stocks reinforces Obi-Chukwu’s view that the current dip may offer bargain-hunting opportunities rather than long-term risk.