CBN’s Forbearance: Why Emefiele Gave Banks Lifeline – And Why Cardoso Is Ending It

During the turbulent years marked by COVID-19, crashing oil prices, and intense foreign exchange volatility, the Central Bank of Nigeria (CBN), under the leadership of former Governor Godwin Emefiele, introduced a special regulatory relief known as forbearance.

This policy was designed to shield Nigeria’s banking sector from systemic collapse and keep the economy afloat during a time of widespread uncertainty.

Forbearance gave banks the flexibility to restructure loans, delay repayments, and operate beyond certain regulatory thresholds without immediate penalties.

This lifeline proved crucial as many banks were battling rising non-performing loans and liquidity pressures.

By relaxing some of the standard financial rules, the policy enabled banks to continue lending to vital sectors like agriculture, manufacturing, and small businesses, even when many borrowers were struggling to meet their obligations.

Emefiele’s Central Bank implemented this measure to cushion the blow of the pandemic on businesses and the financial system, mitigate the impact of the oil price crash, and prevent a wave of bank failures.

It also served to stabilize public confidence, shield banks from forex-related shocks, and promote continued economic activity through credit expansion.

Most importantly, it allowed for loan restructuring on a large scale without triggering regulatory penalties that could have worsened the financial situation.

Thanks to this policy, many banks were able to survive what could have been catastrophic economic shocks.

The broader economy also benefited through job retention, steady credit flows, and a sense of stability during highly uncertain times.

However, under the current CBN Governor, Yemi Cardoso, the forbearance policy is being gradually phased out.

With economic conditions showing signs of improvement, Cardoso’s administration believes the time has come to return to stricter regulatory standards and rebuild financial discipline within the system.

The goal is to encourage banks to take full responsibility for credit risk management, enhance transparency in financial reporting, and align Nigeria’s banking regulations with international best practices.

By ending the policy, the CBN also aims to strengthen investor confidence, ensuring that bank balance sheets reflect actual risk exposure and financial health.

In essence, while forbearance under Emefiele was a necessary tool to weather the storm, Cardoso’s decision to roll it back marks a shift toward more robust regulation and long-term sustainability for the Nigerian financial sector.

However, away from this industry-saving step, Emefiele is currently undergoing prosecution in multiple cases of corruption and abuse of office during his time as Governor of the Central Bank of Nigeria — including an eight-count charge bordering on criminal breach of trust, conspiracy, forgery, and unlawful possession of property suspected to be proceeds of crime, amounting to ₦7,831,002,396 (Seven Billion, Eight Hundred and Thirty-One Million, Two Thousand, Three Hundred and Ninety-Six Naira).