No Dividends, No Excuses: CBN’s Tough Love for Nigerian Banks, by Rahma Olamide Oladosu
There are moments in the life of an economy when hard decisions must be made not for applause or popularity, but to preserve the future. One such moment has arrived in Nigeria. The Central Bank of Nigeria (CBN), under the leadership of Governor Olayemi Cardoso, recently banned the payment of dividends by banks that fail to meet its new capital requirements. This move, while drawing some criticism from shareholder interest groups, is a decisive signal that the regulator is putting the long-term health of the financial system above short-term gains. In a country where policy inconsistencies and weak enforcement have long eroded investor confidence, the CBN’s firmness is not only refreshing but necessary.
It is important to first understand the logic and timing of this policy. Nigeria’s banking sector is on the cusp of another recapitalisation phase, a reality informed by macroeconomic shifts, global financial instability, and the need to prepare for the demands of the African Continental Free Trade Area. The last major recapitalisation exercise was in 2005. Since then, inflation has soared, the naira has depreciated sharply, and the size and complexity of the Nigerian economy have increased significantly. If banks are to effectively support a N1 quadrillion economy, their capital base must be stronger, more resilient, and built to weather storms. Asking banks to retain earnings instead of disbursing dividends is not a punishment, it is a prudent directive grounded in financial realism.
Cardoso and his team at the CBN have demonstrated the courage to make what might seem like unpopular decisions but are rooted in sound regulatory logic. By halting dividend payouts for non-compliant banks, the apex bank is saying clearly that capital adequacy is a non-negotiable foundation for financial stability. A bank cannot claim to be healthy while bleeding capital in the name of satisfying shareholder appetites. In truth, the interest of shareholders is best served when the institution they have invested in is robust, trustworthy, and able to thrive under pressure. Dividends are important, but survival is paramount. A well-capitalised bank is better positioned to expand, lend, and grow returns sustainably. What Cardoso’s CBN has done is to insist on sustainable capitalism over speculative short-termism.
This policy also speaks volumes about the CBN’s renewed commitment to its core mandate of ensuring a safe and sound financial system. Nigeria’s financial history is littered with bank failures that devastated ordinary citizens and eroded trust in the system. Many of those failures were the result of regulatory laxity, political interference, and a culture that prized appearance over substance. The current CBN leadership has decided to break from that past by creating a regulatory environment where no bank is too big to face discipline and no shortcut is tolerated when it comes to systemic stability. This is a message not just to banks but to the market as a whole. Prudence is back in style.
Moreover, this policy aligns with global best practices. Across major financial jurisdictions, dividend restrictions are standard tools used by regulators to preserve capital buffers during economic transitions or financial stress. The European Central Bank, the Federal Reserve, and the Bank of England have all used similar levers at various points. What Nigeria is doing is not out of step. It is in sync with how serious nations manage their banking systems. That it is being done without drama, political posturing, or panic shows a maturity and quiet strength that deserves commendation.
For shareholders, the initial sting is understandable. Many rely on dividends for income, and some may feel they are being unfairly punished for management’s capital planning failures. But in the broader picture, this policy is a vote of confidence in the future. It says that rather than draining resources to meet immediate expectations, the focus is on building banks that can compete regionally and globally. Shareholders may forgo a dividend today, but they stand to gain a stronger institution and better returns in the near future. A bank that survives and thrives is a far better investment than one that dazzles temporarily and collapses when the tide turns.
The implementation of this policy also sends a powerful message about accountability and standards. If banks must meet capital requirements before rewarding shareholders, then they must get serious about efficiency, cost control, and responsible growth. This will separate the well-managed institutions from the rest and deepen market discipline. It may even force banks to rethink their business models, innovate, and move away from rent-seeking behaviours that have long defined the sector. This is how transformation begins.
Cardoso’s leadership style is proving to be one of quiet effectiveness. Rather than chasing headlines or making flamboyant declarations, the CBN under him has focused on solid institutional work. Whether in monetary policy tightening, exchange rate unification, or banking reforms, the emphasis has been on credibility, clarity, and control. The decision to suspend dividends for undercapitalised banks is yet another example of this steady-handed approach. It shows a central bank that is serious about cleaning up the system and equipping it for the future.
This move should also be viewed as part of a broader, more coherent vision for Nigeria’s financial ecosystem. The CBN is not just acting in isolation. It is preparing the ground for a more integrated, inclusive, and investment-ready economy. Strong banks are essential to achieving the government’s aspirations of infrastructure expansion, industrialization, and export growth. Without solid financial intermediaries, even the best economic ideas collapse under the weight of weak implementation. By strengthening banks today, the CBN is building the bridges on which tomorrow’s progress will travel.
There is also a subtle but significant shift in tone coming from the CBN. Gone is the erratic and reactive style of the past. In its place is a thoughtful and deliberate posture that prioritises institutional integrity. This is a critical shift because central banks do not only move markets, they set the mood of economies. When the CBN shows discipline, the entire financial ecosystem takes a cue. Investors, both local and foreign, are more likely to trust a regulator that is consistent, forward-looking, and grounded in global standards. That trust is priceless and sorely needed at this point in Nigeria’s economic journey.
Critics who view this dividend policy as anti-investor are missing the bigger picture. There is nothing pro-investor about weak banks. There is nothing progressive about rewarding mediocrity. And there is nothing visionary about maintaining a status quo that leads nowhere. What Cardoso and the CBN have chosen is the path of reform. It is the path of delayed gratification. It is the path that demands pain today for strength tomorrow. These are not easy choices, but they are the right ones.
In the final analysis, the dividend suspension directive should not be seen as a threat, but as a wake-up call. It is a reminder that banks are public trust institutions and not just private profit machines. Their health is intertwined with the health of the entire economy. When they stand on firm capital footing, they become engines of growth, agents of innovation, and partners in national development. By insisting on this footing, the CBN is protecting not just depositors and shareholders, but Nigeria itself.
This is what leadership looks like. It does not bend to noise. It does not chase popularity. It acts in the best interest of the people, even when those people do not immediately understand the benefit. Cardoso and his team deserve credit for holding the line and doing the hard work of reform. They are not just managing a central bank. They are laying the foundation for a more resilient and prosperous Nigeria. That, in every sense of the word, is worthy of praise.
Oladosu is a Staff Writer with the Economic Confidential
