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FCMB Group Plc has announced plans to explore a debt-to-equity conversion as part of a broader strategy to comply with recent directives from the Central Bank of Nigeria (CBN), which requires banks that benefited from regulatory forbearance during the COVID-19 pandemic to regularise affected credit exposures.
In a corporate disclosure issued on Tuesday, the financial services group stated that its commercial banking subsidiary, First City Monument Bank (FCMB), is actively working to bring its single obligor exposure within the regulatory threshold. The group disclosed that one of its borrowers currently exceeds the CBN’s prescribed Single Obligor Limit (SOL), though the loan remains classified as performing.
“This obligor will be brought within the SOL limit by September 30, 2025, following the conversion to equity of a recently concluded ₦23.1 billion Convertible Loan and the incorporation of audited nine-month projected retained earnings,” the statement read.
The proposed swap is part of FCMB Group’s plan to align with the CBN’s requirement that a bank’s total exposure to a single borrower or group of related entities must not exceed 20% of shareholders’ funds. By converting the debt to equity and integrating retained earnings, FCMB aims to bolster its capital base, enhance capital adequacy, and remain compliant with prudential guidelines.
The group also confirmed that it has significantly reduced its total forbearance-related exposures, from ₦538.8 billion as at 30 September 2024 to ₦207.6 billion by 31 May 2025.
During the COVID-19 crisis, the CBN provided regulatory relief to banks to mitigate the pandemic’s economic impact. This included the temporary suspension of certain prudential requirements, allowing lenders to restructure loans, extend facility tenors, and limit provisioning obligations.
However, in a circular issued last Friday, the CBN directed all affected banks to unwind these regulatory accommodations and fully regularise outstanding problem loans. Additionally, the apex bank imposed restrictions on non-compliant institutions, including a prohibition on dividend payouts, executive bonuses, and foreign expansion initiatives until full compliance is achieved.
Analysts have flagged concerns over the quality of banks’ asset books under forbearance. In a research note, Meristem Securities remarked:
“While capital adequacy ratios (CARs) have appeared strong in recent years, lingering macroeconomic shocks raise doubts about the real recoverability of restructured loans. Many of these exposures—particularly in the upstream oil & gas and refining sectors—remain in Stage 2 classification or under forbearance terms.”
A separate report by Renaissance Capital identified six banks with outstanding forbearance exposures, including Zenith Bank, First Bank Holdings, Fidelity Bank, FCMB Group, United Bank for Africa (UBA), and Access Holdings.
Notably, Guaranty Trust Holding Company and Stanbic IBTC Holdings, which also benefitted from earlier relief measures, were reported to have cleared their exposures prior to the CBN’s latest directive.
As FCMB Group works to finalise its compliance measures ahead of regulatory deadlines, market observers will be watching closely to assess the impact on its balance sheet and capital planning efforts.
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