CBN’s Orthodox Policy Engenders Exploitation, Competition As Banks Rush To Meet Forbearance Deadline 

The policy which aims to ensure financial stability and risk management in the industry has produced a double -edged sword even as the banks race against time to exit the forbearance as the June 30 deadline nears.

 Based on recent announcements, at least four banks, including, Zenith, Nigeria’s largest lender by Tier-1 capital, Access, Fidelity and FirstBank, have confirmed their plans to exit the

CBN’s regulatory forbearance by June 30, 2025.

As the CBN continues to beam its searchlight on the banks to ensure they maintain clean books, lower risks, and adhere to prudential guidelines, the policy, analysts say, may jave engendered competition reminiscent of the 1990s that brought about de-marketing and unecessary competition and rivalry, typified by laying claims to number one position in the industry, among the banks.

With the March 2026 deadline for meeting the new capital requirements looming, the banks have upped their game of squeezing customers through higher charges and expolitative tendencies.

 The CBN’s policy has led to a decrease in deposit rates and an increase in lending rates. This move may affect customers’ access to credit and their overall banking experience.

“While the CBN policy is meant to mitigate risks associated with excessive lending to individual clients, preventing financial instability in the banking sector,  some banks have resorted ro outright exploitation through excessive charges ad well as short chanfing cusromers”, says Friday Ameh, Lagos based analyst.

Ameh commanded CBN for the forbearance since the COVID era about  five years ago, but for which the remnants lingered until 2023, then banks’ situation was compounded by the exchange rate reforms,  and subsidy removal, with the attendedant severe consequences.

For instance, while some banks charge over 30 percent interest on their discriminatory lending, others charge between 3 to 5 percent on deposits.

” GTBank gave me just 2.15 percent, per annum on my  N5.5million fixed deposit last week. This is very discouraging,” laments a customer.

Some analysts say, while CBN has been proactive in managing regulatory forbearance, with the aim of accelerating banks’ capital-raising efforts, many of the lenders may need to increase capital beyond the N500 billion minimum requirement or reinvest a significant portion of their earnings to stabilize their balance sheets.

This, according to them, may be responsible for the aggressive revenue drives, noting that the policy essentially mandates financial institutions to account for loan risks now rather than postponing them, ensuring the sector enters 2026 with a clean slate following its recapitalization exercise.

According to an analyst, the decisive return to orthodox monetary policy by CBN  may have put to testing,  the resilience of financial institutions, like FirstHoldco, UBA, FCMB, GTB, among others.

Beside halting foreign investments, the policy was designed to ensure full provisioning for high-risk exposures and improve cash-based profitability metrics.

“That is why some banks have embarked in unwholesome practices, short changing customers and in some cases,  frustrating those trying to close accounts on poor customer service.”

“I have been trying to close my account with Polaris bank on account of poor service and incessant downtime, but I have always been frustrated by serial requests for one document or the other,” says, a customer.

Metrobusinessnews.com (MBN) gathered that some banks have gone ahead of their customers to their employers to discourage them from closing their account, through delay tactics.

According to Renaissance Capital, an emerging and frontier market investment bank, apart from the major banks, two tier two banks are neckdip in rhe forbearance saga.

“Similarly, in line with our estimates, Fidelity Bank and FCMB, the two top tier-II banks, have forbearance exposures of 10 percent and eight percent of their gross loan books, respectively,”  Rencap stated,

According to Rencap,  “In forbearance exposures at $304 million, $887 million, $134 million, $296 million, $282 million, and $1.6 billion for Access, FirstHoldco, FCMB, Fidelity Bank, UBA, and Zenith Bank respectively.

 “Based on our forbearance exposure estimates, we believe FirstHoldco, Fidelity Bank and Zenith Bank could breach its SOL due to its estimated forbearance exposure.

 Rencap further said, “Looking ahead to first half 2025, based on our earnings forecasts, GTCO, UBA, and Zenith Bank are expected to report positive cash earnings, while Access and FirstHoldco are projected to remain in negative territory.”

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It said, conversely, Access Bank’s cash profits should improve, but remain negative due to interest expenses paid, which they expected to exceed incurred Interest Expenses by N1.9 trillion.