As some banks withhold dividends despite strong earnings, investors say the issue is not only payout disappointment but the need for clearer communication on capital retention, regulatory pressure and long-term value creation.

Bank shareholders have urged Nigerian lenders to improve transparency and strengthen communication with investors, particularly on decisions affecting bank dividend payments.

The call followed the non-declaration of dividends by some banks for the 2025 financial year, despite relatively strong performance across parts of the industry. Shareholders who spoke on the development said investors understood that banks sometimes needed to retain earnings for regulatory, strategic or balance-sheet reasons. However, they insisted that such decisions must be clearly explained to the market.

The National Coordinator of the Pragmatic Shareholders Association of Nigeria, Mrs Bisi Bakare, said banks should provide investors with fuller explanations whenever dividends are withheld. According to her, non-payment of bank dividends does not automatically suggest weak performance, as some affected banks still posted impressive earnings during the year under review.

She said the issue should be understood largely in the context of regulatory requirements, recapitalisation pressure, capital preservation and rising provisioning demands.

Bakare noted that some banks may have been directed by the Central Bank of Nigeria to retain earnings to strengthen capital buffers during and after the ongoing banking recapitalisation exercise. She also pointed to increased provisioning for non-performing loans and legacy exposures, especially in the oil and gas sector.

In her view, the development should be treated as a strategic and regulatory matter rather than a simple earnings problem.

“Strong capital positions and healthy balance sheets remain fundamental to sustainable dividend payments,” she said.

Bakare acknowledged that the non-payment of bank dividends could disappoint income-focused investors who rely on dividend income for regular returns. She also warned that the development could place temporary pressure on the share prices of affected banks, as already reflected in market reactions.

However, she argued that retaining earnings to improve capital adequacy and asset quality could support stronger long-term stability.

“Stronger banks today could translate into better and more sustainable returns tomorrow,” she said.

She advised shareholders not to base investment decisions solely on dividend payments, but to also consider capital adequacy, asset quality, earnings sustainability, governance strength and long-term growth prospects.

Regulatory Forbearance and Bad Loan Provisions

Also speaking, the Secretary-General of the Liberated Shareholders Association of Nigeria, Prince Ridhwan Hamza, said the non-payment of dividends by some banks was connected to regulatory forbearance measures and directives requiring lenders to make provisions for delinquent exposures and bad loans.

Hamza said the development could temporarily affect the share prices of the affected institutions and the broader market, especially where retail investors interpret the decision as a sign of distress.

He, however, expressed confidence that improved quarterly earnings and sustained investor confidence would support market recovery over time.

He urged investors to view the development as part of a necessary adjustment toward stronger financial positions and better future returns.

“The market remains attractive and dividend opportunities still abound,” he said.

Dividend Policy in a Recapitalisation Era

The dividend debate comes at a sensitive moment for Nigeria’s banking sector.

Banks are under pressure to strengthen capital, improve asset quality, manage regulatory expectations and prepare for a more demanding operating environment. In such a period, boards may choose, or be required, to retain earnings rather than distribute cash to shareholders.

For investors, that creates a trade-off. Dividends provide immediate income and signal confidence. Retained earnings, on the other hand, can strengthen capital, support expansion and protect the institution against future shocks.

The problem arises when banks fail to explain the logic clearly.

In a market where many retail shareholders depend on dividends, silence or vague communication can easily trigger suspicion. Investors want to know whether a dividend suspension reflects regulatory caution, recapitalisation planning, loan-loss pressure, capital preservation or deeper balance-sheet weakness.

This is why transparent investor communication is not optional. It is part of market discipline.

BRANDECONOMY Insight

For Bank Investors, Dividend Silence Can Be Costlier Than Dividend Suspension

The shareholders are right to demand better communication.

Dividend decisions are among the most sensitive signals listed banks send to the market. When a bank withholds dividends after reporting profits, investors naturally ask why. If the answer is not clearly communicated, uncertainty fills the gap.

In Nigeria’s banking sector, the current environment makes dividend restraint understandable. Recapitalisation, regulatory forbearance, non-performing loan provisions and legacy exposures can all justify retained earnings. A bank may be profitable and still need to conserve capital.

But shareholders should not be left to guess.

Good investor relations require boards and management to explain the link between dividend decisions and long-term value. If earnings are being retained to strengthen capital adequacy, clean up the balance sheet or position the bank for growth, investors deserve to know. That clarity helps reduce panic, stabilise valuation and preserve confidence.

The lesson for shareholders is also important. Dividend yield is not the only measure of investment quality. A strong bank must be assessed through capital strength, asset quality, liquidity, earnings durability, governance and strategic positioning.

In the short term, bank dividends non-payment may disappoint. In the long term, a healthier bank can create more sustainable value.

The key is transparency. In banking, confidence is capital.