The Central Bank of Nigeria (CBN) recently issued a directive, dated 31st January 2018, barring Deposit Money Banks (DMBs) and Discount Houses (DHs) that do not meet the minimum Capital Adequacy Ratio (CAR) set by the CBN from paying dividends to their shareholders. DMBs and DHs that have a Composite Risk Rating (CRR) of ‘High’, or have Non-Performing Loans (NPL) of above 10% are also barred from paying dividends to their shareholders.
Exceptions are made for DMBs and DHs that meet the minimum CAR, have a CRR of ‘Above Average’ or an NPL ratio of more than 5%, but less than 10%. Such DMBs or DHs can pay out 30% of their net income (profits) as dividends to their shareholders. Also, DMBs and DHs that have CAR of at least 3% above the minimum requirement, a CRR of ‘Low’ and an NPL ratio of more than 5%, but less than 10%, can pay out up to 75% of their profits as dividends to their shareholders. DMBs and DHs that meet the minimum capital adequacy ratio, have a CRR of ‘Low’ or ‘Moderate’, and an NPL ratio of not more than 5% have no restrictions on paying dividends based on this CBN directive.