The Nigerian banking sector is confronting a major stability challenge as a $2 billion (approximately N2.9 trillion) distressed loan from indigenous energy giant Nestoil Limited triggers a historic balance sheet reset and a halt in dividend payments. United Bank of Africa (UBA) and Access Bank are the latest lenders affected, failing to declare dividends for shareholders in their 2025 full-year financial results.
Impact on Major Banks
UBA's full-year 2025 results revealed loan loss provisions of N331 billion. Access Holdings reported a 209% surge in impairment charges on loans and advances, reaching N287.3 billion. Nigerian banks' exposure to oil and gas stood at N21 trillion at the end of 2024, with major lenders including UBA, First Bank of Nigeria (FBN), Access Bank, FCMB Group, Union Bank, Ecobank, and Afreximbank heavily exposed to Nestoil.
Under the stringent leadership of CBN Governor Olayemi Cardoso, the regulator has prohibited affected banks from paying dividends for the 2025 financial year until they fully provision for non-performing loans (NPLs). This approach has resulted in a N2.16 trillion impairment charge across five tier-one and tier-two lenders, including Access, UBA, Ecobank, First HoldCo, and FCMB, directly reducing net income and preventing expected shareholder distributions.
Debt Landscape and Recovery Efforts
The crisis centers on Nestoil's inability to service syndicated loans facilitated during periods of higher oil production expectations. Nestoil, a large-scale indigenous operator, has added systemic pressure on lenders with high exposure to the independent oil and gas segment. Banks have secured a Mareva injunction freezing Nestoil assets across over 20 institutions, including bank funds, properties, and cargoes. Receivership efforts continue despite legal pushback, with banks moving to seize real estate, movable assets, and oil cargoes, potentially leading to prolonged legal disputes that lock up capital and threaten liquidity.
Individual Bank Impacts
FCMB Group: FCMB adopted a defensive stance in 2025, allowing its loan book to contract as credit defaults rose. Net impairment losses on loans doubled to N92.5 billion from N43.7 billion. FCMB has not announced a dividend for the 2025 full year.
FirstHoldCo Plc: FirstHoldCo (parent of First Bank) took a N748 billion impairment charge on its loan book in response to the CBN's demand to stop hiding bad loans. The bank will likely not pay a dividend for 2025.
United Bank for Africa (UBA): UBA's audited FY 2025 results showed a N331 billion loan loss provision. Group Profit Before Tax fell 47% to N423.4 billion from N803.7 billion in 2024. UBA is not paying a dividend for 2025.
Ecobank Group: Ecobank recorded net impairment losses on loans of N707.52 billion in its 2025 FY audited results, flagged as a key audit matter by auditors.
Access Holdings: Access Holdings saw bad-loan impairments more than double in FY 2025, with total comprehensive income plunging 58%, prompting the group to skip dividend payout. Impairment charges jumped 209% to N287.3 billion.
Systemic Risks and Strategic Outlook
Experts warn that recovery for banks may be elusive. The CBN's stance prioritizes capital retention, suspending dividends until NPLs fall below 5%, a shift from prior forbearance. Banking sector NPLs neared 7% in 2025, threatening stability if oil loan woes persist. The situation highlights risks associated with highly leveraged, asset-backed project financing in the volatile oil and gas sector.
While dividend suspension is painful for investors, financial analysts argue that Cardoso's big bang provisioning is necessary to prevent a 2009-style banking collapse. By forcing banks to take the hit now, the CBN ensures the N21 trillion total exposure to the oil sector is accurately reflected, not hidden under forbearance. This oil-related stress comes amid the end of the Banking Recapitalisation exercise, which has helped banks that raised new capital absorb these write-offs.
