Nigeria’s banking sector is facing a fresh wave of pressure after a massive bad debt linked to indigenous oil and gas firm Nestoil Limited forced some of the country’s biggest lenders to suspend dividend payouts, raising concerns about asset quality and financial stability.
At the centre of the crisis is an estimated $2 billion (about ₦2.9 trillion) distressed loan tied to the energy company. The exposure has triggered what analysts describe as a “balance sheet reset” across parts of the banking industry, as lenders scramble to absorb losses and comply with stricter regulatory standards.
Among the most affected institutions are United Bank for Africa and Access Bank, both of which failed to declare dividends in their 2025 full-year results. For shareholders accustomed to steady payouts, the development marks a significant shift, underscoring the growing cost of non-performing loans within the sector.
The financial hit has been substantial. UBA reported loan loss provisions of about ₦331 billion, while Access Holdings saw its impairment charges on loans surge by more than 200 percent to roughly ₦287.3 billion. These provisions, essentially funds set aside to cover potential loan defaults, have eroded profits and made dividend distributions impractical.
The problem extends beyond just two banks. Industry data shows that several lenders (including First Bank of Nigeria, FCMB Group, Ecobank and others) have exposure to the oil and gas sector, which stood at about ₦21 trillion by the end of 2024. A significant portion of that exposure is tied to companies like Nestoil, making the issue systemic rather than isolated.
Regulatory intervention has further tightened the situation. Under the leadership of Central Bank Governor Olayemi Cardoso, lenders are now required to fully provision for bad loans before declaring dividends. This “no dividend until cleaned up” stance reflects a broader effort to strengthen the banking system after years of regulatory forbearance that allowed banks to defer recognizing troubled loans.
The result is a sweeping recalibration of bank balance sheets. Across multiple lenders, impairment charges have surged into trillions of naira, effectively wiping out distributable profits and forcing banks to prioritise capital preservation over shareholder returns.
Beyond immediate financials, the episode raises deeper questions about risk concentration in Nigeria’s banking sector, particularly its heavy exposure to oil and gas. While the sector has long been a key driver of economic activity, it also introduces volatility, especially when large borrowers run into financial distress.
For investors, the message is clear: dividend expectations can no longer be taken for granted. For regulators, the challenge is to enforce discipline without stifling credit growth. And for the banks themselves, the path forward will depend on how quickly they can clean up their books, rebuild capital buffers, and restore confidence in their earnings.
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Emmanuel Abara Benson is a business journalist and editor covering artificial intelligence, global markets, and emerging technology.
He has previously worked with Business Insider Africa and Nairametrics, reporting on finance, startups, and innovation.
His work focuses on AI, digital economy, and global tech trends.
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