Nestoil, bankers’ apocalypse
This minute, a retired school principal in Lagos is refreshing her brokerage app, waiting for dividends that will never come. Somewhere in Enugu, a widowed trader, who invested her modest
This minute, a retired school principal in Lagos is refreshing her brokerage app, waiting for dividends that will never come. Somewhere in Enugu, a widowed trader, who invested her modest inheritance in bank shares, is staring endlessly at her account statement, waiting for a non-existent dividend.
Neither of them approved a bank loan nor sat on a credit committee where billions were frittered on a forecast. Yet, they are the ones now bearing the cost.
This is how modern banking distributes pain; the decision to give bad loans is recklessly made in glass towers, but the consequences are dispersed to vulnerable, far-flung shareholders.
For years, Nigerian banks appeared resilient, even sophisticated in risk management. Beneath that image, however, subsists “regulatory forbearance” introduced during the COVID-19 crisis, which allowed lenders to restructure loans and delay classifying troubled exposures.
That policy, intended as a cushion, morphed to something else. As Matilda Adefalujo, a banking and fixed income analyst at Meristem Research, observes, the relief masked the true quality of some assets and inflated capital ratios. Loans that should have been flagged as impaired, she states in a recent interview, continued on paper to perform. Balance sheets were faked to look stronger. Consequently, risk wasn’t eliminated; it was merely postponed.
When the Central Bank of Nigeria (CBN) unwound forbearance in 2025, those same loans migrated en masse into Stage 3 (credit-impaired), triggering a surge in provisions under the International Financial Reporting Standard (IFRS 9) rules, and forcing banks to recognise losses that they had craftily concealed.
“Banks are effectively cleaning up their books after years of regulatory leniency,” notes Adefalujo. Cleaning up, in this context, implies that something was left unattended; that losses were allowed to accumulate, surreptitiously, until they could no longer be ignored.
There is a particular cruelty in the way the banking system fails. It often happens with a hush behind polished glass and hidden beneath quarterly reports, until the day ordinary people discover that the system they trusted had for a long while been exhausted.
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The numbers, when stripped of abstraction, become troubling. Impairment charges across the industry rose to N3.2 trillion in 2025, a 39 per cent jump from the previous year, thus unveiling a crisis. The risks that were hitherto concealed had assumed strength in concealment. By the time they were revealed, their consequences were unmanageable.
Yet to get a real handle on the conundrum, one must look beyond policy to behaviour and the decisions that preceded the crisis, which made it inevitable. By the end of 2024, Nigerian banks had accumulated approximately N21 trillion in exposure to the oil and gas sector.
Within that exposure sat a single, destabilising obligation: roughly N2.9 trillion owed by the Ernest Azudialu Obiejesi-owned Nestoil Limited. The scale alone demands attention, but it is only a part of the narrative. What matters more is how such exposure came to exist across multiple institutions, including the United Bank for Africa (UBA), Access Holdings, First HoldCo, FCMB Group, Ecobank Transnational Incorporated, Union Bank, and Afrexim Bank.
These were syndicated loans reviewed and approved through formal processes: risk officers conducted assessments, committees deliberated, and directors appended their signatures. The facilities were extended, by the industry’s own account, during periods of “higher oil production expectations.”
Nestoil’s failure to meet its obligations has since triggered what one report described as “systemic banking pressure.” But it is worth pausing here to ask a more uncomfortable question: how does the failure of a single borrower reverberate so widely unless the system itself permitted excessive concentration?
While risk in banking is inevitable, its escalation, as evidenced by the Nestoil-bankers’ misdemeanour, borders on prodigality. Beyond the narrative of default, resonates an alignment of multiple institutions arriving, independently yet collectively, at opportunistic malfeasance.
Once forbearance ended, the arithmetic corrected itself with exacting simplicity. Zenith Bank recorded impairment charges of N843.4 billion. First HoldCo followed with N710 billion. Ecobank Transnational Incorporated posted N707.5 billion. Access Holdings recorded N468.04 billion, while United Bank for Africa reported N331.1 billion.
As their profits thinned, their balance sheets constricted. And, most visibly, dividends disappeared. Access Holdings, UBA and First HoldCo were unable to declare dividends for the 2025 financial year. Banking is an adult endeavour after all; now, they are pressed to live their true realities. Because provisioning requirements consumed their earnings, their capital had to be preserved and their losses recognised.
The Yemi Cardoso-led Central Bank of Nigeria (CBN) has been somewhat firm. To ensure that capital buffers reflect reality, banks have been prohibited from paying dividends until they fully provide for non-performing loans. If the aim is stability, there is logic in the approach. Pundits describe it as a necessary, painful measure to avoid a deeper crisis.
You’d be forgiven for wondering why banking regulations weren’t decisive while the loans were facilitated, given that banking rules are deemed more effective before risk crystallises, not after.
Predictably, executives have resorted to grandstanding. For instance, UBA’s CEO, Oliver Alawuba, in an interview with Arise TV, said, “We’re going after these defaulting customers, and there are signs that they are paying back. Once they do, we’ll be in a position to pay dividends for this year.”
There is an unintended admission in his scrambled reassurance. Recovery is an act of response. It does not substitute for the prudence that ought to have prevented the need for it. Meanwhile, the consequences have been dispersed to those least equipped to deflect them.
Shareholders, as silent participants, simply provide capital while trusting governance structures. They accept that risk is part of the enterprise. What they do not control are the specific judgments that determine how risk is taken. Impairment charges “directly reduced the banks’ net income… preventing them from distributing expected dividends” is clinical jargon, but the effect is not.
For the small investor, a missed dividend could manifest as delayed school fees or deferred admission. It could be delayed medical expenses resulting in avoidable death. When banks experience growth, executives binge on the profits and celebrate institutional prestige. When losses manifest, especially those deferred from earlier periods, they are absorbed more diffusely, dispersed onto shareholders and, by extension, the broader public.
Bankruptcy, in the Nigerian sense, is not an equal-opportunity event. Large borrowers renegotiate and restructure their obligations, cushioned by capital buffers and regulatory frameworks. But the ordinary investors enjoy no such facilities. Their losses are immediate and their recourse limited, thus asserting a devious hierarchy of resilience at the top and exposure at the bottom.
The Nestoil-bankers’ crisis is, at its core, a failure of judgment. A failure of loan committees that sanctioned concentrated exposures in a volatile sector. A failure of executives who pursued expansion under favourable assumptions without sufficiently accounting for reversal. It is also a failure of a system that allowed temporary relief to extend into prolonged opacity.
There is a tendency, in moments like this, to retreat into technical exposition. To speak of IFRS standards and provisioning cycles. While these are necessary tools of analysis, they can also obscure the human reality beneath them.
The crisis, this time, should not be hidden behind such language. It must be seen plainly: as a convergence of decisions by incompetent bankers and reckless corporate borrowers alike, how they transferred risk outward and deferred responsibility.
Nestoil’s inability to meet its obligations is part of that story. But it is not the whole of it.
