The Nigerian banking industry is witnessing a growing divide between well-capitalised lenders and institutions struggling with regulatory constraints, following the recent stress-testing exercise conducted by the Central Bank of Nigeria, according to Bismarck Rewane, Managing Director and Chief Executive Officer of Financial Derivatives Company.

Speaking at a Lagos Business School Breakfast Session, Rewane said the regulatory exercise has effectively created a two-tier banking landscape, separating institutions with sufficient capital buffers from those burdened by elevated provisioning requirements and dividend restrictions.

“The banking sector has seen moderate corrections since the start of the stress test,” Rewane noted, highlighting the impact of the exercise on investor sentiment and market performance.

According to data presented during the session, only a handful of lenders emerged from the exercise with the financial strength and regulatory approval to reward shareholders for the 2025 financial year. Among the banks cleared to declare dividends are Guaranty Trust Holding Company, Zenith Bank, Stanbic IBTC Holdings and Wema Bank.

GTCO led the pack with a dividend payout of N11.76 per share, while Zenith Bank distributed N8.75 per share. Stanbic IBTC paid N4.00 per share, and Wema Bank declared N1.25 per share, reinforcing their positions as some of the sector’s strongest capitalized institutions.

In contrast, several major lenders were unable to distribute dividends after failing to meet the regulatory requirements imposed by the stress test. Those affected include Access Holdings, First HoldCo, Fidelity Bank, FCMB Group, Ecobank Transnational Incorporated and United Bank for Africa.

The suspension of dividend payments has sparked a sell-off in banking equities on the Nigerian Exchange as investors reassess expected returns from the sector. Market participants say the restrictions have weakened the attractiveness of several banking stocks that have historically been regarded as reliable dividend plays.

Investor concerns have been further heightened by developments in the oil and gas sector. Analysts point to the recent Supreme Court ruling that lifted an asset freeze on Nestoil, a development that could require some lenders to reassess approximately $1.1 billion in oil-related exposures. Market observers warn that banks with significant exposure to the facility may face additional provisioning requirements, potentially placing further pressure on earnings and capital adequacy ratios.

The combination of regulatory scrutiny, dividend restrictions and uncertainty surrounding energy-sector loans has accelerated portfolio rebalancing across the market. Institutional investors are increasingly shifting funds toward banks with stronger capital positions and assured dividend prospects, while also building liquidity ahead of the anticipated listing of the Dangote Refinery.

The expected Initial Public Offering of Dangote Refinery is already attracting significant attention from fund managers, with many market participants positioning for what could become one of the largest listings in African capital market history.

Despite the short-term pressure on banking stocks, analysts argue that the CBN’s intervention is intended to strengthen the resilience of the financial system by compelling lenders to recognize potential risks early and maintain stronger balance sheets. However, they caution that the sector is likely to remain under pressure in the coming quarters as investors digest the implications of tighter regulatory oversight, higher provisioning requirements and a more selective dividend environment.

For now, the stress test has drawn a clear line across the banking industry—rewarding institutions with strong capital buffers while exposing vulnerabilities among lenders facing heightened regulatory and credit-risk challenges. (Nigerian Tribune)