By Chinwendu Obienyi

The move, which the apex bank says is aimed at ensuring compliance with regulatory forbearance and Single Obligor Limit (SOL) requirements, once again dragged the broader market into negative territory.

Banking stocks, already under pressure from interest rate volatility and rising impairments, reacted negatively to the development on Monday. As a result, the NGX Banking Index fell by 4 per cent, with major lenders such as Zenith Bank, GTCO, and Access Holdings recording significant losses.

However, the trend continued unabated with losses in Zenith Bank (2 per cent), First Holdco (4.2 per cent) and AccessCorp (2.2 per cent) which resulted in 0.30 per cent shaved off the stock market’s All-Share Index (ASI) at the close of business yesterday.

Analysts say the market’s reaction reflects growing anxiety over the stability of banks’ earnings and the sustainability of investor returns in a tightening regulatory environment.

Market participants, led by the Association of Securities Dealing Houses of Nigeria (ASHON), have faulted both the content and timing of the directive, describing it as potentially disruptive to ongoing capital-raising efforts by banks following the CBN’s recapitalisation mandate.

The circular, issued on June 13, 2025, instructs banks to halt dividend payouts indefinitely as part of a broader effort to strengthen the financial system and ensure asset quality ahead of the new capital threshold deadlines.

However, ASHON, which represents licensed securities dealers in the country, warned that the abrupt announcement of such price-sensitive information could unsettle investor confidence in a sector that accounts for the bulk of daily transactions on the Nigerian Exchange Limited (NGX).

“The indefinite suspension may erode investor confidence in the banking sector, potentially triggering a sell-off of bank shares on the Nigeria Exchange Limited (NGX), where the sector dominates daily transactions.

We understand the need for regulatory compliance but the CBN’s approach in this instance may have unintended consequences, particularly at a time when banks are trying to shore up their capital bases to meet the new requirements”, ASHON said in the statement.

ASHON further criticised the CBN for not consulting key capital market stakeholders before issuing the circular, suggesting that a more discreet or phased communication strategy could have mitigated the market fallout.

“Unless an alternative solution is found, this directive may hinder bank’s capital-raising efforts, particularly those yet to commence their capital raise before the deadline”, the association said.

Several banks are in still in the stages of raising capital to meet the CBN’s revised capital base set at N500 billion for international banks and lower tiers for national and regional players with analysts warning that the dividend suspension, if not reviewed or clarified soon, could dampen investor enthusiasm for upcoming offers, especially from banks yet to announce their capital raise strategies.

With confidence appearing fragile and banks needing significant market participation to meet regulatory capital targets, mandate is on the CBN to provide clearer guidance or explore alternative measures to avoid further erosion of market sentiment.